THE RELATIONSHIP BETWEEN CAPITAL STRUCTURE AND FIRM PERFORMANCE: A PANEL DATA ANALYSIS OF THE BIST FOOD SECTOR

This study aims to investigate the relationship between return on assets (ROA) and capital structure ratio (CSR). It uses annual data for the years 2010-2024 and implements a heterogenous panel data analysis. The dependent variable of focus is ROA, obtained through the net profit-to-total asset ratio, while the independent variable is the ratio Total Debt/Total Assets (CSR) representing the capital structure. The econometric analyses were conducted using the Stata 14.0 software package. The outcome suggests a persistent and positive effect of CSR on ROA in the long term. A rise of one unit in CSR correlates with an increase of 0.09 units in ROA, confirming the Net Income Theory’s assertion that leveraging higher debt levels can effectively reduce financing costs, as evidenced by firms in the BİST Food Sector.