The Relationship between Capital Structure and Performance of Non-Financial Firms Listed on the Amman Stock Exchange

Abstract

The aim of this study is to take a step forward to examine the relationship between capital structure and firm performance particularly concentrating on the firms listed on Amman Stock Exchange (ASE). The current study uses 95 sample firms from non-financial firms listed on ASE. The period of the present study is (2013 - 2017). The regressions have been shown and the results are showed rely upon the fixed effect model. The results show that all variables represent capital structure by Total Debt to Total Assets, Long Term Debt to Total Assets, Firm Size, Sales growth, Tangibility, and Liquidity have the relationship to firm’s performance represents by return on assets and Tobin’s Q. Sales growth and Total Debt to Total Assets have statistically positive significant relationship with firm’s performance. Meanwhile, Long Term Debt to Total Assets and Liquidity show a statistically insignificant relationship with firm performance. Similarly, Tangibility has a statistically negative significant relationship with Tobin’s Q and return on assets. Lastly, the study is contributed to top managers by providing value of an effective and efficient capital structure to firm performance in Jordanian business environment, by facilitating them in improving their capital structures to maximise shareholders’ wealth as well as findings of this study will be important to other researchers by providing empirical evidence on the influence of capital structure on firm performance.

Keywords: Amman Stock Exchange, Capital Structure, Firm’s Performance, Jordan

DOI: 10.7176/RJFA/13-2-09

Publication date: January 31^st 2022