The Impact of Corporate Leverage on Stock Returns

Abstract

The amount of debt financing used by the company for operating and investing purposes will have an impact on financing costs and business risk, etc., and may also change investors' expectations and stock market prices. Fifty randomly selected listed companies from the S&P 500 index in 2025 will be used as the research sample in this paper, and descriptive statistics and linear regression methods will be employed to examine the relationship between debt ratio and stock return according to industry characteristics. Based on the above data, it can be seen that the debt ratios and stock returns of these companies vary among different industries. The overall leverage ratios of the technology, finance and energy industries are relatively low, and those of the industrial and public utilities industries are relatively high. At the same time, regression analysis shows that there is a negative correlation between debt ratio and overall stock return, and highly indebted enterprises do not have higher stock returns. Excessive financial leverage may reduce the stock performance of the enterprise. Based on the above results, it can be concluded that the company's debt level and financial risk are relatively low. It can serve as a model for other enterprises to optimize their capital structure, formulate financing plans, and distribute funds to investors.