An Empirical Study on Inter-Dependability of Firm's Performance and Its Capital Structure with Reference to Oman Telecom Industry

An optimal capital structure (i.e. mix of debt and equity) is a crucial decision making domain for every business firm. The decision plays a critical role not only because of the need to maximize total wealth, but also as it describes organization’s ability to cope up and potential survival with its external and internal environment.This paper focuses on the relationship between capital structure and firm performance of companies taken from telecom industry from Oman. For study two topmost telecom companies of Oman i.e. OMANTEL and NAWRAS are being considered. The Study indicates that there is a strong and positive relationship between firm performance and its capital structure. Study shows a strong positive relationship between firm performance and two other determinants i.e. debt-equity ratio (DE) and debt to total capitalization ratio (DTCap) and also strong positive relationship between capital structure and two determinants of firm performance i.e. ROCE and ROA while weak negative correlation is found between capital structure and NPR. A linear regression model has been developed to estimate the effect of various determinants of capital structure on firms’ financial performance