Capital structure and firm performance

Evidence from the airport industry

Abstract

The privatisation and liberalisation waves have been increasing the number of private companies in the aviation industry. This, in turn, necessitates new policy analyses on major financial decisions regarding capital structure, corporate governance and investments. Among these major topics, the research about the association between capital structure and financial performance of the aviation companies largely focuses on the airlines. But a comparable analysis for the airport companies is less explored. The goal of this study is to contribute to the literature by analysing how the capital structure of the publicly traded airport companies affects their profitability and market valuation. Using an unbalanced panel data sample of 29 publicly traded airports from 20 countries over the 1989-2017 period, our findings suggest that higher total and long-term leverage tend to decrease return on assets whereas they are positively associated with return on equity.