Capital Structure and Profitability Dynamics: A Literature Review
Keywords:
Capital Structure, Profitability, DER, DAR, Literature Review.Abstract
This study aims to analyze the effect of capital structure on corporate profitability using a literature review approach. A total of 20 national and international journal articles published were reviewed to identify the relationship between capital structure and profitability. The results indicate that most studies found a significant effect of capital structure on profitability, measured by the Debt to Equity Ratio (DER), Debt to Asset Ratio (DAR), Return on Assets (ROA), and Return on Equity (ROE). However, several studies reported inconsistent findings, indicating the existence of a research gap. Therefore, the relationship between capital structure and profitability remains relevant for further investigation. The implication of this study is the need to incorporate moderating variables and firm characteristics in future research to obtain a more comprehensive understanding.
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