International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

The Relationship between Capital Structure and Profitability
Dr. Mohammad Fawzi Shubita, Dr. Jaafer Maroof alsawalhah

This study seeks to extend Abor’s (2005), and Gill, et al., (2011) findings regarding the effect of capital structure on profitability by examining the effect of capital structure on profitability of the industrial companies listed on Amman Stock Exchange during a six-year period (2004-2009). The problem statement to be analyzed in this study is: Does capital structure affect the Industrial Jordanian companies? The study sample consists of 39 companies. Applying correlations and multiple regression analysis, the results reveal significantly negative relation between debt and profitability. This suggests that profitable firms depend more on equity as their main financing option. Yet recommendations based on findings are offered to improve certain factors like the firm must consider using an optimal capital structure and future research should investigate generalizations of the findings beyond the manufacturing sectors.

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