Impact of the Capital Structure Choice on Firm Performance: A Quantitative Study of the Biggest Healthcare and Energy Companies in the USA

Abstract: Purpose The aim of this research paper is to provide valuable insights to existing theoretical foundation of choice of capital structure, and exploring the relationship between capital structure and firm performance through testing whether capital structure affects firm performance in the USA listed healthcare and energy companies. Theoretical perspective The presented theories cover different views on the preferred choice of capital structure and academics views on its effect on firm performance. The theoretical framework also discusses the determinants of capital structure and industry differences between healthcare and energy firms Methodology A quantitative study with a deductive approach was conducted. The empirical material in the form of variables was collected from a Bloomberg terminal on a sample of publicly traded S&P500 firms in healthcare and energy industry. Empirical foundation The empirical material is based on chosen metrics from secondary financial statement data that authors used as proxies for analysing capital structure and firm performance. Conclusion The performed analysis on the healthcare and energy industry companies has found evidence of the applicability of Modigliani-Miller theory for analysing the effect that capital structure has on firm performance and thus firm value.