Abstract:

This study examines the relationship between capital structure and financial performance in non-financial companies listed on the Portuguese and Spanish benchmark stock market indices. The sample comprises 29 firms observed over five years, producing a balanced panel of 145 firm-year observations. Financial performance is measured by return on assets (ROA) and return on equity (ROE), while capital structure is represented by total indebtedness (GE), long-term indebtedness (LTA) and short-term indebtedness (STA). Pooled ordinary least squares regressions are estimated with firm-clustered robust standard errors, including firm size, solvency and a country dummy as controls. Total and long-term indebtedness are negatively and significantly associated with both ROA and ROE. Short-term indebtedness is also negatively associated with ROA, while firm size and the country dummy are positively related to both measures. The evidence suggests that the level and maturity of debt matter for the financial performance of Iberian listed firms.