Published Online:October 2025
Product Name:The IUP Journal of Corporate Governance
Product Type:Article
Product Code:IJCG021025
DOI:10.71329/IUPJCG/2025.24.4.36-56
Author Name:A Priyanka, Irala Lokanandha Reddy and B Naresh Goud
Availability:YES
Subject/Domain:Management
Download Format:PDF
Pages:36-56
The study investigates the effect of financial leverage on business performance and the significance of board diversity in modeling the interconnection between financial leverage and business performance. By examining how leverage decisions influence business outcomes and how diverse boards enhance or mitigate their impact, the study provides insights into governance frameworks and capital financing strategies. The study collected data from 2020 to 2024 from 110 randomly chosen sample companies listed on the BSE 500 by employing pooled ordinary least squares (OLS) regression, fixed effect model, random effect model, and generalized method of moments. Debt-to-equity (D/ E) ratio, return on capital employed (ROCE), and composite board diversity index were taken as measures of financial leverage, firm performance and board diversity. The key findings indicate the strong influence of financial leverage on firm performance, and the moderating function of board diversity in reducing the unfavorable influence of financial leverage on corporate performance. The study emphasizes the need for promoting board diversity as a strategic tool to mitigate leverage-related risk.
Financial leverage has been a key component in a firm’s capital structure and in enhancing its financial performance.