Purpose: This paper explores the connection between capital structure and financial performance within European listed firms. The primary objective is to demonstrate an inverse U-shaped relationship between these two variables and pinpoint an optimal debt-equity mix.Design/methodology/approach: In this study, we adopt a dynamic modeling approach to investigate the relationship between a firm’s capital structure and financial performance. Drawing on well-established theories and prior empirical studies, our model examines 3,121 dividend-paying firms from 41 European countries over 14 years, from 2008 to 2021. To enhance the reliability of our findings, we employ two distinct estimation techniques: the fixed effect model (FE) and the system generalized method of moments (System-GMM).Findings: This study reveals an inverse U-shaped relationship between the firm’s financial performance, measured by the return on equity (ROE) and its capital structure (total liability to total assets ratio). Furthermore, an optimal capital structure of about 29% is determined for all firms in the sample, and about 21%, 28% and 41% industry-specific capital structure for manufacturing, real estate and wholesale trade, respectively.Originality/value: This paper contributes to existing knowledge by empirically determining an optimal capital structure for listed firms across various industries in Europe, which very few studies have attempted to do in the past. An optimal capital structure is an invaluable benchmark for managers and other stakeholders, informing their decision-making.

Engaging in Environmental, Social, and Governance (ESG) activities entails costs that influence a firm’s financial and market performance. However, it is expected that the long-term benefits of ESG engagement outweigh these costs, leading to superior performance. Despite extensive research on the ESG–performance relationship, findings remain mixed. This study examines the moderating effect of country governance, measured by the Worldwide Governance Indicators (WGIs), on the relationship between firms’ ESG scores and their financial and market performance in the European context. Using a two-stage least squares (2SLS) regression model and a dataset spanning 12 years (2011–2022) for 2083 listed European firms, we find that WGI significantly moderates the ESG–performance relationship. Our results indicate that ESG engagement alone has a negative impact on financial performance (ROA), suggesting that the costs associated with ESG investments often outweigh their short-term benefits. However, strong governance structures mitigate these costs, transforming ESG investments into value-enhancing activities. Conversely, ESG engagement positively influences market performance (Tobin’s Q), signaling long-term value to investors. Yet, in jurisdictions with strong governance frameworks, this effect diminishes, as ESG compliance becomes a baseline expectation rather than a differentiating factor.

Purpose – This paper aims to investigate if there is a significant relationship between corporate ESG (environmental, social, and governance) scores and firm profitability (ROA) and whether this relationship is positive, negative, or neutral. Methodology – The study examines all listed companies from the European tourism industry for which ESG scores are available. The final sample consists of 48 firms from 14 European countries and 258 firm-year observations, obtained through the Refinitiv database for the period from 2010 to 2019. Panel regression analysis was used to examine the relationship between ESG scores (independent variable) and ROA (dependent variable), including financial leverage and firm size as control variables as well. Findings – The results show that ESG scores are negatively related to firm performance as measured by ROA and such a relationship is statistically significant at 5%. Higher levels of ESG scores are associated with lower levels of ROA and vice-versa. Conclusion –The findings suggest that instead of just trying to give the appearance of being ESG-oriented, it is important for companies to actually implement proper ESG practices and standards. Also, in order to promote the adoption of environmental, social, and governance (ESG) practices by companies, it is crucial to educate the public about the long-term benefits of these practices and encourage support for companies that follow these standards. Keywords: ESG score, tourism, profitability, Europe. JEL Codes: G30, Q56, Z33.

Finding the optimal debt-equity mix, where shareholders’ wel­fare and firm value are maximized is the goal of every business organiza­tion. The literature review revealed a broad spectrum of mixed and contra­dictory empirical findings on this topic, suggesting that the debate is far from over. This paper aims to assess the impact of capital structure on the profitability of the tourism industry in the European continent. This study is motivated by the importance that the tourism industry has for the economic development of European countries. The sample includes all European-list­ed firms in the tourism industry. Data is extracted from the Thomson Reu­ters (Refinitiv) database for a period of 10 years, i.e., 2010-2019. Panel data regression is used to determine the impact of the debt-to-assets ratio on the return on assets. The results reveal that the debt ratio has a significant neg­ative impact on ROA, but not on ROE.

Purpose- This study aims to empirically investigate the relationship between Environmental, Social, and Governance (ESG) performance and financial performance, with a particular focus on the mediating role of intellectual capital (IC) in publicly traded IT firms in the United States. Methodology- The research uses a sample of 204 U.S.-based publicly listed IT firms, covering 917 firm-year observations from 2011 to 2022. Descriptive statistics, correlation analysis, and multiple regression models were employed to test the proposed hypotheses and assess the impact of ESG on Return on Assets (ROA) and the potential mediating role of intellectual capital (IC). Findings- The results indicate that intellectual capital partially mediates the relationship between ESG performance and financial performance. While IC contributes significantly to explaining the effect of ESG on ROA, it does not fully account for the relationship. Conclusion- This study highlights the importance of considering intellectual capital as a strategic asset in enhancing the financial returns of sustainability-oriented initiatives. The findings provide actionable insights for corporate leaders and policymakers seeking to align ESG practices with long-term financial goals.