Capital Structure Optimization: Strategies for Balancing Risk and Return

Abstract

Capital structure optimization is a crucial aspect of financial management that involves balancing risk and return to maximize firm value. This paper explores various strategies for optimizing capital structure, examining the trade-offs between debt and equity financing. By analyzing the impact of different capital structures on financial performance, risk, and return, this study provides insights into best practices for achieving an optimal capital mix. We discuss theoretical frameworks, empirical evidence, and practical approaches to capital structure optimization, highlighting the role of market conditions, firm-specific factors, and industry trends. The findings offer valuable guidance for managers and financial analysts seeking to enhance firm value through strategic capital structure decisions.