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Relationship between economic performance and capital structure: some empirical evidence

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  • Pietro Pavone

Abstract

This paper investigates the relationship between corporate financial choices and economic performance. The analysis concerns a sample of Italian companies in the construction sector in the period 2008-2017. Descriptive statistics, correlation and regression are used to analyse the data. Return on equity (ROE), ROA and ROI are used as measures of company performance; short-term debt, long-term debt, and total debts are used as independent variables. The findings of the study show that short-term debt has a positive and statistically significant effect on the ROI of real estate development companies, while it has a negative and statistically significant effect on the ROE of construction companies. The study also shows a positive and significant relationship between long-term debt and the ROI of real estate project development companies and between total debt and the ROE of construction companies.

Suggested Citation

  • Pietro Pavone, 2022. "Relationship between economic performance and capital structure: some empirical evidence," International Journal of Behavioural Accounting and Finance, Inderscience Enterprises Ltd, vol. 6(4), pages 296-310.
    • Handle: RePEc:ids:ijbeaf:v:6:y:2022:i:4:p:296-310
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