Financial structure, risk, and firm performance: multilevel meta-analysis of empirical evidence from over three decades (1990-2024)

Neoclassical theory posits that firms aim to maximize profit and shareholder wealth, yet this objective is often constrained by multifaceted risks that undermine financial performance. Financial structure which explains the composition of debt and equity financing, is widely considered a key determinant of firm performance, however, empirical evidence remains inconclusive. This study employs a two-level multilevel meta-analysis of empirical evidence from 1990 to 2024 to examine how financial structure influences firm financial performance, accounting for risk, firm size, economic context, and theoretical heterogeneity. The results show that financial structure does not exert a uniform effect; instead, leverage structure is the primary driver, with equity-based leverage exhibiting negative effects while other leverage measures show positive effects, and these relationships vary significantly across firm size and economic context. Financial risk generally exhibits negative but inconsistent effects, and the moderating role of financial structure in mitigating risk is weak. Financial performance measures also display selective sensitivity to leverage. Theory-based analysis reveals that differences in empirical findings arise mainly through theory-contingent variation in the leverage–performance relationship. This study contributes by integrating financial structure, risk, and theory within a unified meta-analytic framework, demonstrating that empirical inconsistencies reflect systematic heterogeneity, and providing policy-relevant insights for context-specific financing strategies, particularly for SMEs in developing economies.