TITLE:
The Effect of Capital Structure on Profitability of Basic Materials Saudi Arabia Firms
AUTHORS:
Alwalid Mohammad Saleh A. Hajisaaid
KEYWORDS:
Capital Structure, Return on Equity, Short-Term Debt, Long-Term Debt, Total Debt
JOURNAL NAME:
Journal of Mathematical Finance,
Vol.10 No.4,
November
6,
2020
ABSTRACT: This research investigated the relationship between
capital structure and profitability
of eight companies working in the basic material sector in Saudi Arabia during the period
2009 to 2018. The statistical techniques used are regression analysis, fixed effect
model, random effect model, and Hausman test. The dependent variable is the return on equity (ROE).
In contrast, independent variables
are a short-term debt to total assets ratio (SDA), long-term debt to total assets ratio
(LDA), and total debt to total assets ratio (DA). The results illustrate a negative relationship between short-term
debt to total assets ratio
(SDA) and profitability and this complement with studies like Hamid and others (2015) [1] and
Abeywardhana (2015) [2], a negative relationship between long-term debt (LDA) and profitability which
complement with studies
like El-Sayed Ebaid (2009) [3], and positive relationship between total debt (DA) and profitability
which complement with studies like Abor (2005) [4], Hamid and others (2015).