INTERNATIONAL JOURNAL OF ACADEMIC EXCELLENCE AND RESEARCH (IJAER) e-ISSN: 3107-3913 ( Vol. 02 | No. 3 | July - September, 2026 )

The Impact of Capital Structure on Firm Performance and Shareholder Wealth: A Systematic Review of Empirical Evidence

Author: Yukta Jadaun

Purpose – The purpose of the study is to review the existing literature on capital structure, financial performance and shareholders' wealth and to examine the relationship between capital structure decisions, financial performance and shareholders' wealth as reported in the previous study in order to identify trends, inconsistencies, and research gaps in the existing literature which provides insight for future research. Design/methodology/approach– The study adopts a systematic literature review (SLR) approach to examine 30 peer reviewed articles and refereed journal papers focused on capital structure, financial performance, and shareholder wealth. Findings– Capital structure influences firm performance and shareholder wealth, yet empirical results are mixed and studies have shown scarcity of direct measuring shareholder’s wealth. Most of the research has been conducted on international level which highlights the research gap on domestic level and targets the need for future research. Practical implications– Policymakers and regulators should encourage improved disclosure and standardized measures of shareholder wealth to better assess the consequences of capital structure policies. The identified lack of domestic (Indian) studies also calls for targeted empirical research to inform local corporate governance and financing guidelines. Originality/value– The review provides a comprehensive synthesis of 30 empirical studies, identifies inconsistent effects of leverage, and uncovers two key gaps — limited Indian context research and sparse use of shareholder wealth metrics — thereby setting a clear research and policy agenda to better align capital structure decisions with shareholder value.

Jadaun, Y. (2026). The Impact of Capital Structure on Firm Performance and Shareholder Wealth: A Systematic Review of Empirical Evidence. International Journal of Academic Excellence and Research, 02(03), 11–21. https://doi.org/10.62823/IJAER/02.03.243

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DOI:

Article DOI: 10.62823/IJAER/02.03.243

DOI URL: https://doi.org/10.62823/IJAER/02.03.243

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