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Examining the Influence of Capital Structure on Firm Financial Performance: A Case Study of Financial Services Firms on the Lusaka Securities Exchange (LuSE)

Author

Listed:
  • Aggrey Chinyama Muyoba

    (Cavendish University, Zambia)

  • Dr. Lee Mahlangu

    (Cavendish University, Zambia)

Abstract

This research investigated the impact of capital structure on the financial performance of selected financial services firms listed on the Lusaka Securities Exchange (LuSE) between 2019 and 2023. The analysis focused on five companies: Standard Chartered Bank Plc, Zambia National Commercial Bank Plc, Madison Financial Services Plc, Zambia Reinsurance Plc, and Real Estate Investment Zambia Plc. The objective was to examine how Debt to Equity ratio influences Net Profit Margin as a performance indicator within Zambia's financial sector. The study relied on quantitative financial data derived from audited financial statements and official LuSE disclosures. Results showed that banking institutions maintained high D/E ratios while sustaining strong profit margins, reflecting efficient use of financial leverage, whereas certain non-banking institutions exhibited extreme leverage indicating instability. The study concludes that effective debt management supports profitability, while excessive leverage can endanger viability. Recommendations include balanced financing strategies and strengthened regulatory standards for capital structure adequacy.

Suggested Citation

  • Aggrey Chinyama Muyoba & Dr. Lee Mahlangu, 2025. "Examining the Influence of Capital Structure on Firm Financial Performance: A Case Study of Financial Services Firms on the Lusaka Securities Exchange (LuSE)," East African Finance Journal, East African Finance Journal, vol. 4(3).
    • Handle: RePEc:cwk:eafjke:2025-21
    DOI: 10.59413/eafj/v4.i3.1
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    References listed on IDEAS

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