The Impact of Capital Structure on the Firm Performance

Abstract

This paper mainly studies the impact of capital structure on enterprises. To gain a deeper understanding of this issue, this paper chose different sectors, such as capital-intensive and labor-intensive industries, which rely heavily on debt financing but face higher financial risks during a recession. This is in stark contrast to labor-intensive industries. In labor-intensive industries, equity financing may be more conducive to the operational flexibility and adaptability of enterprises. Find out the corresponding literature analysis, and summarize the commonness through concrete examples. The paper discusses the characteristics of capital structure of developed and developing countries and compares the differences of capital structure in different economic environments. Through the study of relevant literature, the characteristics and differences of capital structure in different industries and countries are summarized. Identifies areas for improvement, pointing out limitations in the current understanding of capital structures, such as industry-specific differences and changing market dynamics. At the same time, according to the characteristics of the industry, market conditions and risk tolerance, to provide constructive advice for enterprises to optimize the capital structure.