Citation:

Rupali S. Ambadkar, Tejal M. Solanki. "Capital Structure, Financial Performance, and Firm Value: Insights from a Mediation Perspective" International Research Journal of Economics and Management Studies, Vol. 4, No. 12, pp. 1-8, 2025. Crossref. http://doi.org/10.56472/25835238/IRJEMS-V4I12P101

Abstract:

This research explores the effect of capital structure on a firm's value, with an emphasis on how financial performance acts as a mediator in 13 FMCG companies from the Nifty FMCG Index. A balanced panel dataset comprising 130 observations over ten years (2013-2014 to 2022-2023) was used for data analysis, employing Panel Data Regression, Path Analysis, and the Sobel test. The empirical evidence suggests that higher reliance on debt financing enhances both financial performance and firm value. Mediation analysis indicates that financial performance partially and complementarily mediates the relationship between capital structure and firm value, with both direct and indirect effects being positive. Considering the partial and complementary mediation effect of financial performance on firm value, FMCG firms should try to align their capital structure decision with financial performance for building long-term value in the company. The study provides valuable insights for financial managers in FMCG companies, emphasizing the importance of aligning capital structure decisions with financial performance.

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Keywords:

Capital Structure, Financial Performance, Firm Value, FMCG, Mediation.