The Impact of Capital Structure on Firm Value: A Comparative Study of a Sample of Iraqi and Jordanian Companies for the Period 2011–2022

Abstract

This research aims to investigate the extent to which capital structure, as an independent variable, influences firm value, as a dependent variable, within a sample of Iraqi and Jordanian manufacturing companies. The study utilized three indicators to measure capital structure: total debt to total assets, total long-term debt to total assets, and total debt to total equity, applied to both Iraqi and Jordanian manufacturing companies. Furthermore, market value growth rate was adopted as the indicator for measuring firm value. A set of research hypotheses was developed. To achieve the objectives of this study, these hypotheses were tested using a sample of industrial companies listed on the Iraq Stock Exchange and the Amman Stock Exchange for the period spanning from 2011 to 2022. The sample comprised nine Iraqi industrial companies and nine Jordanian industrial companies. Data analysis and hypothesis testing were conducted using simple and multiple regression techniques with the SPSS-26 software. The research concluded with several key findings, most notably a direct impact of capital structure on firm value. The most important recommendations derived from this research emphasize the necessity for Iraqi industrial companies to diversify their capital structure, endeavor to develop various financing sources, and achieve a balance between internal and external sources of funding.