The impacts of capital structure on firm's performance: Evidence from EAGLEs and NESTs emerging markets

Capital structure decisions are considered as one of the major financial management decisions of a company, which by proper and efficient adoption of that undoubtedly, a company can play a significant role in achieving its ultimate goal, which is to maximize the value of the company and increase the ownership value of its stockholders. Because it is argued that capital structure by influencing the cost of the capital can improve the operational performance of firms and increase their value. Given the importance of this topic, in this study, the impact of capital structure on the performance of manufacturing companies operating at the different levels of emerging markets in terms of share in global gross domestic product (GDP) growth has been investigated from 2010 to 2019. Therefore 5 Countries each China, India, Brazil, Indonesia, and Turkey are selected from the EAGLEs Emerging countries, which are situated at the top level of emerging markets in terms of share in global GDP, and 5 other countries each Poland, Thailand, Sri Lanka, Saudi Arabia, and Chile are selected from the NEST emerging markets which are situated at the bottom level of emerging markets. The empirical results obtained from this study show that, except for some insignificant positive and negative relationships for some countries, In general leverage (Debts/Assets) has a negative significant relationship with the performance of manufacturing companies in each of EAGLEs and NESTs emerging countries. This means that by increasing the share of debt in the capital structure of companies in the above sample emerging countries, their operational performance decreases. Keywords: Capital structure, financial leverage, firm's performance, emerging market.