Do Financial Leverage, Growth and Size Affect Profitability of Jordanian Industrial Firms Listed?

Alghusin, Nawaf

doi:10.6007/ijarbss/v5-i4/1580

Cited by 16 publications

(18 citation statements)

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“…The results show that financial leverage has a significant negative effect on the return on asset, whereas size and liquidity have positive effect on the financial performance proxy by return on asset. Alghusin (2015) investigated the impact of financial leverage, company's growth, tangibility, firm size on profitability using twenty-five ( 25) Jordanian Industrial companies listed on the Amman Stock Exchange (ASE) from 1995-2005. The results reveal among others that financial leverage proxy by the ratio of total debt to total asset is negatively related to financial performance denoted by ROA.…”

Section: Review Of Empirical Studiesmentioning

confidence: 99%

Financial Leverage and Financial Performance of Oil and Gas Companies in Nigeria: A Re-examination

Abubakar¹

2021

TURCOMAT

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This study assessed the effect of financial leverage on the financial performance, using data from the annual reports of 7 quoted oil and gas firms in Nigeria, as well as from the Nigerian Stock Exchange (NSE) daily official lists over the period 2005- 2018. Descriptive statistics were used in data presentation, while random effects panel estimator was applied in determining the effect of financial leverage variables as short-term debt ratio (STDR), long-term debt ratio (LTDR) and total-debt equity ratio (TDER) on the financial performance, measured by the return on equity (ROE). The regression results from the random effects model (REM) indicate that STDR and LTDR have no significant effect on the financial performance, and TDER has a negative but significant effect on the financial performance denoted by ROE. The study concludes that higher financial leverage of quoted oil and gas companies in Nigeria attenuates shareholders’ wealth. The investment implication of this conclusion is that oil and gas companies should look more carefully at the utility maximization value of debt vis-à-vis equity in their capital structure.

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Section: Review Of Empirical Studiesmentioning

confidence: 99%

Financial Leverage and Financial Performance of Oil and Gas Companies in Nigeria: A Re-examination

Abubakar¹

2021

TURCOMAT

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“…However, acknowledging the methodological weaknesses of the study, the authors did not find any significant association between debt equity ratio and EPS, while debt equity ratio has significant and positive effect on ROE and ROA as measures of financial performance. Alghusin (2015) investigated the impact of financial leverage, company's growth, tangibility, firm size on profitability using twenty-five (25) Jordanian Industrial companies listed on the Amman Stock Exchange (ASE) from 1995-2005. The results reveal among others that financial leverage proxy by the ratio of total debt to total asset is negatively related to financial performance denoted by ROA.…”

Section: Review Of Empirical Studiesmentioning

confidence: 99%

Financial Leverage and Financial Performance of Oil and Gas Companies in Nigeria

Abubakar¹

2020

OJMS

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This study was carried out to determine the effect of financial leverage on the financial performance, using secondary data obtained from the annual reports of 7 quoted Oil and Gas firms in Nigeria, and the Nigerian stock exchange (NSE) daily official lists over the period 2005- 2016. Descriptive statistics such as mean, median, minimum, maximum, standard deviation, coefficient of variation, skewness and kurtosis were used in data presentation, while random effects panel estimator is applied in determining the effect of financial leverage variables as short-term debt ratio (STDR), long-term debt ratio (LTDR) and total-debt equity ratio (TDER) on the financial performance measured by the return on equity (ROE). The regression results from the random effects model (REM), the best panel estimator in this study as revealed by the F-test and the Hausman test for best model selection, indicate that STDR and LTDR have no significant effect on the financial performance, and TDER has a negative significant effect on the financial performance denoted by ROE. The study concludes that higher financial leverage in the capital structure of quoted Oil & Gas firms in Nigeria deteriorates shareholders wealth measured by ROE. The study recommends that firms in the Oil & Gas sector should substitute at least 90 per cent of debt in the capital structure with equity, through bonus issue, right issue and higher proportion of retained earnings in the capital structure. Abubakar, A. | Department of Business Management, Federal University Dutsin-Ma, Katsina State, Nigeria

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“…The main purpose of the study carried out by [1] is to investigate the impact of Financial leverage, Company's Growth, non-current / total assets ratio, and firm's Size as independent variables on profitability in proxy of Return On Assets ratio (ROA) as dependent variable. A sample of 25 Jordanian Industrial companies listed on Amman Stock Exchange(ASE) for a period of 10 years (from 1995-2005) was selected.…”

Section: Review Of Related Literaturementioning

confidence: 99%

“…The simple regression (prediction) model is statistically written as, FinLevt = βo +β1FirmSzt + Ԑt (1) Where, FinLev = Financial Leverage FirmSz = Firm Size (Total Assets) βo= coefficient (constant) to be estimated β1= parameter of the independent variable (Firm Size) to be estimated t = current period Ԑ = stochastic disturbance (error) term Granger-Causality test is conducted in the context of linear regression models and specified in bivariate linear autoregressive model of two variables X 1 andX 2 based on lagged values as applied by Pasquale (2006):…”

Section: Model Specificationmentioning

confidence: 99%

“…In financial affairs of companies, financial leverage is a very important factor in the business sectors, especially working in the developing countries [1].Effective financial leverage is very important due to its significant effect on profitability of company and thus the existence of company in the marke t [12].The privileges and rights which a company enjoys within, around and outside it may be a factor of size; in terms of current and fixed asset base. The financial institutions should be more disposed to advance credits to companies with a sound asset base.…”

Section: Introductionmentioning

confidence: 99%

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Effect of Firm Size on Corporate Borrowing of Oil and Gas Firms in Nigeria

Ikechukwu¹

2016

IJEFM

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The purpose of the research was to investigate to what extent the size of a firm in Nigeria oil and gas industry affects the magnitude of external borrowings. The study went further to examine the relationship between firm size and financial leverage in the same industry; as well as the causal relationship among the variables under study. Simple regression model was formulated to guide the analysis. The analysis of the time series data reveals that financial leverage is significantly but negatively affected by firm size in the industry. This implies that as firms increase in total assets, the firms tend to play down on sourcing for fund through external borrowing. The outcome is in line with some previous studies and in accordance with the theoretical framework of the study. There is no causality running from either Firm Size to Financial Leverage or otherwise, at 2 years lagged period; which implies that Financial Leverage does not granger cause Firm Size and vice versa. A negative relationship was revealed between firm size and financial leverage; though very insignificant; which implies that firm size and financial leverage change/increase in opposite direction in oil and gas industry. Therefore, firms at growth age, with a growing asset base, will need external borrowing more than a firm at mature or declining age with huge asset base and accumulated retained earnings.

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Do Financial Leverage, Growth and Size Affect Profitability of Jordanian Industrial Firms Listed?

Cited by 16 publications

References 0 publications

Financial Leverage and Financial Performance of Oil and Gas Companies in Nigeria: A Re-examination

Financial Leverage and Financial Performance of Oil and Gas Companies in Nigeria: A Re-examination

Financial Leverage and Financial Performance of Oil and Gas Companies in Nigeria

Effect of Firm Size on Corporate Borrowing of Oil and Gas Firms in Nigeria

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