Until now, researchers are not in consensus, whether it is the capital structure that influences performance or performance that influences capital structure or both. The main objective of this study was to establish the relationship between capital structure and financial performance of firms listed on the NSE by employing a generalised linear model (GLM) as an improvement on ordinary least regression (OLS). The results of the study revealed that efficient and profitable firms employ more debt than comparable firms that are less profitable possibly because profitable firms’ exposure to financial risk is low. There results also indicate that firms that use more debt outperformed those that use less debt.

Capital structure decisions are common across firms, yet capital structure theories lack a consensus on how much of debt capital firms should use to finance their operations. The main objective of this study was to investigate the bi-directional relationship between capital structure and financial performance of firms listed on the NSE. The study used canonical correlation technique to determine the bi-directional relationship between capital structure and performance. The result revealed that dominant capital structure indicator to be used in an analysis to predict performance is the total debt to the total asset ratio. In the case of performance, the two variables that relate to capital structure are book value to market value ratio and asset turnover ratio. The results support the conclusion that a bidirectional relationship exists between capital structure and debt capital.

It is generally accepted that boards of directors play a fundamental role in corporate governance and the structure of the board plays a significant role in the functioning of a company (Jensen, 1993). The main objective of this study was to investigate the relationship between debt capital, firm performance, and change of CEO in firms listed on the NSE. The results of the study revealed that firms in which an individual shareholder has influence or controlling interest are reluctant to replace their CEO even when performance is below average. The results also revealed that the replacement of the CEO is not performance driven, but is debt capital driven. Specifically, the results suggest that medium leverage ratio is associated with change in CEOs on firms listed on the NSE.