heal.abstract
This dissertation was written as part of the MSc in Banking and Finance at the
International Hellenic University.
The present study addresses the effect of capital structure on profitability of listed
non-financial firms in the London Stock Exchange and more especially in FTSE 100
and FTSE 250 Indexes. The objectives of the study are to identify the nature of the
relationship between capital structure and firm performance, as well as explore the
impact of capital structure on firm performance.
The issue is important since the capital structure is a decision that firms take
and influence all stakeholders. Models structured as having dependent variables
ROA, ROE, and Gross Profit Margin, whereas Debt (Long term debt, Short term debt
and Total debt) was the independent variable. Research models were developed for
each group of the data as well as for each independent variable. The Simple linear
regression analysis conducted using OLS, fixed effects, and random effects methods.
According to the research results, capital structure affects profitability, to a
greater or lower extent. There is not a specific rule for firms to follow since the
capital structure is also an internal decision and can be affected by several factors.
Nevertheless, the present study adds in the existing literature by confirming previous
research results as well as by revealing new relationships between the variables
selected for the research.
en