Financial Leverage and Firm Performance: An Empirical Review and Analysis

John Davies Odhiambo, Christine Kanana Murori and Catherine Elsa Aringo
Additional contact information
John Davies Odhiambo: Department of Accounting and Finance, Technical University of Mombasa, Kenya
Christine Kanana Murori: Department of Accounting and Finance, Technical University of Mombasa, Kenya
Catherine Elsa Aringo: Department of Accounting and Finance, Technical University of Mombasa, Kenya

East African Finance Journal, 2025, vol. 4, issue 1

Abstract: This study examines the impact of financial leverage on firm performance and value, focusing on the trade-offs between debt and equity financing. By reviewing theoretical and empirical literature, including trade-off and pecking order theories, the paper highlights both the benefits of leverage in enhancing profitability and growth and the risks of excessive debt that may lead to financial distress. The findings emphasize the importance of maintaining an optimal capital structure to ensure long-term sustainability across firms and industries.

Keywords: Financial leverage; firm performance; debt financing; capital structure; trade-off theory (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ijcsacademia.com/index.php/eafj/article/view/141

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cwk:eafjke:2025-02

DOI: 10.59413/eafj/v4.i1.2

Access Statistics for this article

More articles in East African Finance Journal from East African Finance Journal
Bibliographic data for series maintained by Dr. Charles G. Kamau ().