The Impact of Capital Structure, Firm Size, and Liquidity on Financial Performance in the Textile Industry

Abstract

This study explores the impact of capital structure, firm size, and liquidity on the financial performance of firms in the textile industry, a sector that is both labor-intensive and capital-dependent. Using secondary data collected from 30 publicly listed textile companies over a five-year period, the research applies panel data regression analysis to examine how these variables influence profitability. The results indicate a significant negative relationship between capital structure and financial performance, suggesting that high debt levels can reduce profitability by increasing financial strain and risk. In contrast, firm size and liquidity show positive correlations with financial performance, implying that larger firms with efficient liquidity management are better positioned to enhance profitability and sustain operations during market fluctuations. The findings emphasize the importance of maintaining an optimal balance in capital structure, where excessive debt is avoided, and liquidity is carefully managed to support growth and operational stability. This study provides practical recommendations for managers and policymakers in the textile industry, highlighting the need for strategic financial management to improve overall firm performance. By focusing on the unique financial dynamics of the textile sector, this research contributes to the existing literature and offers valuable insights for optimizing financial outcomes in an industry facing global competition and market volatility