Finance

Sociology

Business

Actuarial science

Capital adequacy ratio

Equity (law)

Population

Mathematics

Capital formation

Debt-to-equity ratio

Nonprobability sampling

Statistics

Debt ratio

Debt

Demography

Return on equity

Profitability index

Return on capital employed

Political science

Econometrics

Capital structure

Economics

Microeconomics

Profit (economics)

Return on assets

Descriptive statistics

Financial capital

Panel data

Risks

Debt finance, when considered a source of finance, always leads to financial risk; however, it is also considered a source of increased profitability in the normal business scenario. It has always been challenging to find the correct debt equity combination. In the discussed sample of the telecom industry in the USA, an abnormally high total liability-to-total assets ratio was observed. Thus, it is inclined to investigate the capital structure (CapSt) effect on firms’ profitability. By taking annual data of the telecom industry from 2012 to 2020 in the USA, unbalanced cross-sectional data (panel data) comprising 421 firm-year observations for 72 firms were studied using pooled panel regression, univariate analysis, correlation, and descriptive statistics models. We decided to test the impact of CapSt (Total Liabilities to Total Assets (TLsTAs) and Total Equity to Total Assets (TETAs)) on the profitability (Return on Assets (ROA) and Return on Equity (ROE)) of firms in the telecommunication industry in the USA. The results reveal that the ratio of TLsTAs has a significant impact on ROA, and TETAs has a significant impact on ROA. However, TLsTAs and TETAs have no impact on ROE.

Impact of Capital Structure on Profitability: Panel Data Evidence of the Telecom Industry in the United States