The Influence of Level Capital Structure on Firm Performance: An Empirical Study of Non-Financial Listed Firms in Jordan

Abstract

The article intends to explore the role of the capital structure (C.S) in the firm financial performance of 84 non-financial firms listed in the Amman stock exchange (ASE) during the period 2012–2018. The explained variable was market share as a novel proxy for operational performance. The explanatory variable is the total debt to total assets, while the as firm size, firm age, and sales growth were taken as control variables.This article provides a new viable evidence on the operational performance effects of C.S decisions using panel data of Jordanian listed firms.Using a random-effect regression method to analyse balanced panel data, based on the Hausman test statistics. This article found that the ratio of total debt to total assets has a positive and significant relationship with the market share of non-financial listed firms in Jordan.The outcome is consistent with most studies conducted in developed countries.This result indicates that Jordanian listed firms should be optimizing their C.S to distinguish themselves in the market.While the relationship is positive and significant between firm size and sales growth as control variables with a market share, unlike the earlier studies, the current article surprisingly establishes that firm age is not meaningfully contributing to non-financial Jordanian sector performance.In the Jordanian case, this article suggests that the operational performance of firms depends more on debt as their main corporate financing option.