Moderating Role of Corporate Governance on the Relationship between Financial Leverage and Financial Performance: A Conceptual Review

Abstract

Organisations face new hurdles in the form of competitive advantage in the unstable environment of today. Leverage in finances and corporate governance are key factors in improving the performance of the company. The study's conclusion is that the data regarding the correlation between financial leverage and firm performance are inconsistent. Comprehending the implicit relationship between financial leverage and company success empowers managers to devise strategies that will yield superior operational outcomes. It also aids in improving performance and achieving higher objectives for the organisation. The idea that financial leverage is a significant source of competitive advantage was emphasised by this study. When it comes to any kind of organisation, corporate governance is thought to be the most significant factor and a key factor in determining the organization's success. It is a crucial component of the organization's ability to survive in the marketplace since corporate governance determines an organization's performance, which is a definite sign of its ability to stay in business. The relationship between financial leverage and firm performance was then effectively moderated by corporate governance. Corporate governance, financial leverage, and organisational performance are defined for this purpose. Examples from academic academics are taken into consideration to illustrate how corporate governance and financial leverage affect the performance of organisations. The conclusion is that an organization's success and accomplishments are significantly correlated with how it maintains and manages its financial leverage and corporate governance.