IDEAS home Printed from https://ideas.repec.org/a/cwk/eafjke/2025-14.html

Financial Leverage and Corporate Financial Performance: A Comprehensive Review

Author

Listed:
  • Ahmad Omar Abubakar

    (School of Business, Technical University of Mombasa, Kenya)

  • Stacey Ayiecha Anyonje

    (School of Business, Technical University of Mombasa, Kenya)

Abstract

This paper examines the relationship between financial leverage and firm performance across various industries and economic contexts. The research analyzes how debt financing influences corporate profitability, stability, and overall financial health. Through a systematic review of recent literature, the study investigates different leverage metrics and their effects on financial performance indicators such as Return on Assets (ROA), Return on Equity (ROE), and Earnings Per Share (EPS). The findings reveal that while moderate levels of financial leverage can enhance firm value and shareholder returns, excessive debt may lead to financial distress and undermine long-term sustainability. The optimal capital structure varies significantly by industry, firm size, and market conditions, suggesting that companies should tailor their leverage strategies to their specific operational characteristics and risk profiles.

Suggested Citation

  • Ahmad Omar Abubakar & Stacey Ayiecha Anyonje, 2025. "Financial Leverage and Corporate Financial Performance: A Comprehensive Review," East African Finance Journal, East African Finance Journal, vol. 4(2).
    • Handle: RePEc:cwk:eafjke:2025-14
    DOI: 10.59413/eafj/v4.i2.3
    as

    Download full text from publisher

    File URL: https://ijcsacademia.com/index.php/eafj/article/view/233
    Download Restriction: no
    File URL: https://libkey.io/10.59413/eafj/v4.i2.3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. John Davies Odhiambo & Christine Kanana Murori & Catherine Elsa Aringo, 2025. "Financial Leverage and Firm Performance: An Empirical Review and Analysis," East African Finance Journal, East African Finance Journal, vol. 4(1).
    2. Huanzhe Chen & Md Jahidur Rahman, 2023. "Intellectual capital and financial performance: evidence from Chinese retail firms," International Journal of Learning and Intellectual Capital, Inderscience Enterprises Ltd, vol. 20(4), pages 394-409.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alzbeta Kucharcikova & Maria Durisova & Nikola Staffenova, 2024. "Implementation of the human capital management concept: an empirical study of small trading company," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-14, December.
    2. Ardita Todri & Petraq Papajorgji, 2025. "Integrating Financial and Organizational Drivers in SME Debt Dynamics: Insights from Radial Basis Function Analysis," Sustainable Regional Development Scientific Journal, Sustainable Regional Development Scientific Journal, vol. 0(2), pages 45-58, December.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cwk:eafjke:2025-14. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Charles G. Kamau (email available below). General contact details of provider: https://ijcsacademia.com/index.php/eafj .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.