Exploring Mediating Effect of Sustainable Growth between Capital Structure and Firm Performance

Abstract

This research examine the mediation impact of the sustainable growth rate, regarding the link between capital structure and firm performance in context of NSE 500 index. Using the Baron and Kenny approach, Sobel tests, and bootstrap techniques, the total debt ratio has positive direct influence on return on assets and Tobin's Q, but a negative direct effect on sustainable growth rate, implying that while debt increases profitability, it may impede long-term growth. The debt-to-equity ratio has diverse consequences, exhibiting negative direct affects on return on assets and Tobin's Q and good indirect effects through the sustainable growth rate, underlining the intricacies of leverage in corporate performance.