Capital structure and corporate performance: evidence from Jordan

By Rami Zeitun, Gary Gang Tian. 2007

740 citations recorded by the source corpus.

The central objective of this study is to investigate and examine the effect which capital structure has had on corporate performance using a panel data sample representing of 167 Jordanian companies during 1989-2003. This paper also examines the effect which external shocks have had on Jordanian corporate performance and industrial sectors. Our results showed that a firm’s capital structure had a significantly negative impact on the firm’s performance measures, in both the accounting and market’s measures. This result suggests that agency issues may lead to higher debt in the capital structure than there should be. We also found that the short-term debt to total assets (STDTA) level has a significantly positive effect on the market performance measure (Tobin’s Q), which could support Myers' (1977) argument that firms with a high STDTA have a high growth rate and high performance. The Gulf Crisis 1990-1991 was found to have a positive impact on Jordanian corporate performance as the Jordanian market was the only market that was open to Iraq. On the other hand, the outbreak of Intifadah in the West Bank and Gaza in September 2000 had a negative impact on corporate performance, as most of the Jordanian companies exported to the West Bank.

Subfields: Accounting

View Paper: https://www.semanticscholar.org/paper/25123d2979c013a855a874bf692f63c846176ab8

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Citations in the corpus

The relationship of capital structure decisions with firm performance: A study of the engineering sector of Pakistan (2012, background): “Zeitun and Tian (2007) in his study on the Jordanian firms found a highly negative relation between the firm performance by employing both market and accounting based variables.”
Capital Structure and Profitability of Nigerian Quoted Firms: The Agency Cost Theory Perspective (2014, background): “In Jordan, Zeitun and Tian (2007) conducted a study on capital structure and corporate performance on 167 Jordanian Firms between 1989-2003.”
Capital Structure, Profitability and Firm Value: Panel Evidence of Listed Firms in Kenya (2014, positive): “The preponderance of findings, however, is that a negative relationship exists between leverage and financial performance (Majumdar and Chhiber, 1999; Gleason et al., 2000; and Simerly and Li, 2000; Hammes, 2003; de Mesquita and Lara, 2003; Zeitun and Tian, 2007).”
Effects of Capital Structure on Firmâ€™s Performance: Empirical Study of Manufacturing Companies in Nigeria (2014, background): “Nonetheless, most of the studies fall under the same range of period of 2000-2011 as their year of assessment, the exception of Zeitun and Tian (2007) reviewed between 1989-2003 with a period of fifteen (15) years.”
The Relationship between Capital Structure and Firm Performance Evaluation Measures: Evidence from the Tehran Stock Exchange (2012, background): “The results of this hypothesis is consistent with the research results of Onaolapo and Kajola (2010), Fosberg and Ghosh (2006), Houang and Song (2006), Mramor and Crnigoj (2009) and Zeitun and Tian (2007), but is not consistent with the research results of Aburub (2012).”
The Impact of Capital Structure on Risk and Firm Performance: Empirical Evidence for the Bucharest Stock Exchange Listed Companies (2018, background): “As well, Zeitun et al. (2017) revealed that the speed of adjustment to the optimal capital structure is, on average, slower after the crisis, due to the lack of debt financing supply.”
Factors Affecting the Financial Performance of Listed Companies at the Nairobi Securities Exchange in Kenya (2013, background): “Similarly, Zeitun and Tian (2007) found that debt level is negatively related with financial performance.”
IMPACT OF CAPITAL STRUCTURE ON THE FINANCIAL PERFORMANCE OF NIGERIAN FIRMS (2012, background): “We expect a positive relationship between growth opportunities and firm’s performance.”
Influence of Capital Structure on Firm Performance: Evidence from Bangladesh (2014, result): “These results are also consistent with Zeitun and Tian (2007), Abor (2007), Salteh, et al. (2012) and Ebrati et al. (2013).”
An Empirical Analysis of Capital Structure on Firms’ Performance in Nigeria (2018, background): “Zeitun and Tian [17], argue in support of this, that firms with growth opportunities are able to generate profit from investment.”