Journal of Economic and Administrative Sciences: Article Information

Journal of Economic and Administrative Sciences
An Empirical Study of Firm Structure and Profitability Relationship: The Case of Jordan
Abdussalam Mahmoud Abu‐Tapanjeh,
Article information:
To cite this document:
Abdussalam Mahmoud Abu‐Tapanjeh, (2006) "An Empirical Study of Firm Structure and Profitability Relationship:
The Case of Jordan", Journal of Economic and Administrative Sciences, Vol. 22 Issue: 1, pp.41-59, https://
doi.org/10.1108/10264116200600003
Permanent link to this document:
https://doi.org/10.1108/10264116200600003
Downloaded on: 21 June 2019, At: 20:42 (PT)
References: this document contains references to 0 other documents.
To copy this document: permissions@emeraldinsight.com
The fulltext of this document has been downloaded 1056 times since 2006*
Downloaded by UNIVERSITAS SUMATERA UTARA At 20:42 21 June 2019 (PT)
Users who downloaded this article also downloaded:

(2005),"The effect of capital structure on profitability: an empirical analysis of listed firms in Ghana", The Journal
of Risk Finance, Vol. 6 Iss 5 pp. 438-445 <a href="https://doi.org/10.1108/15265940510633505">https://
doi.org/10.1108/15265940510633505</a>
(2009),"The impact of capital-structure choice on firm performance: empirical evidence from Egypt", The Journal
of Risk Finance, Vol. 10 Iss 5 pp. 477-487 <a href="https://doi.org/10.1108/15265940911001385">https://
doi.org/10.1108/15265940911001385</a>
Access to this document was granted through an Emerald subscription provided by emerald-srm:584523 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service
information about how to choose which publication to write for and submission guidelines are available for all. Please
visit www.emeraldinsight.com/authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of
more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online
products and additional customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication
Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.
*Related content and download information correct at time of download.

Journal of Economic & Administrative Sciences Vol. 22, No. 1, June 2006 (41 -59)
An Empirical Study of Firm Structure and Profitability

Relationship: The Case of Jordan
Dr. Abdussalam Mahmoud Abu-Tapanjeh

Mutah University
Abstract
The present study examines the relationship of firm structure and
profitability, taking into consideration major characteristics such as firm

size, firm age, debt ratio and ownership structure of 48 Jordanian industrial
companies for a period of one decade, that is from 1995 to 2004, listed in
Amman Stock Exchange. Hypotheses are developed taking into account both
previous research and the particular idiosyncrasies of the national context.
The study employed two model specifications in order to test the hypotheses,
using the profitability measurement of Rate of Return on Equity (ROE) and
Rate of Return on Investment (ROI). The empirical findings suggest that
firm structure emerges as an important factor affecting profitability. The
results indicate that a weak relationship existed between some of the
independent variable and profitability, except for debt ratio.
Introduction
Firm structure plays a determinant role in firm profitability. A
considerable research was undertaken examining the relationship between
firm structure and profitability. This relationship is viewed from two
competing hypotheses. On the one hand, the traditional market structure-
conduct-performance or collusion hypothesis and on the other hand, the
efficient market hypothesis. The traditional hypothesis postulates that firm
structure determines profitability, i.e., high–profit firms are found in high-
profit industries with favorable competitive structure. Whereas, the efficient
market hypothesis advances the notion that more subtle firm qualities related
to organizational and managerial capabilities are those that underline the
firm’s competitive advantage, which leads to profitability.
(Demsetz, 1973) and (Peltzman, 1977) postulated that market
concentration is a result of firms’ superior efficiency that leads to larger
market share and profitability. In other words, market-concentration lowers
the cost of collusion between firms and this results in higher than normal
profits. Many studies are found testing these competing hypotheses and the
results concludes with general mixed opinions. (Bain, 1956) and (Mason,
1993) suggest that firm structure involving mainly industry concentration
and entry barriers are important determinants of firm profitability. Whereas,
Journal of Economic & Administrative Sciences June 2006
studies like (Porter, 1991) view that market environment partly exogenous
and partly subject to influences by firm actions.
Despite the influence, either negative or positive, on the firms’
profitability, specific strategic responses might strengthen in prevailing
serious impediments to firm success. Other firm specific factors such as
capital intensity, firm size, debt ratio, firm age and market share also affect
profitability.
Most prior studies were built on western data. Very rare research was
done in Jordan as well as in the Arab countries. Thus, this study will add to
our understanding of the extent to which the result in Arab countries will be
similar to past studies.
The remainder of this paper is organized as follows. The next section

gives the relevant theoretical background on firm concentration and
profitability as well as the development of the hypotheses. The third section
describes the methodology and the sample selection. Section four portrays
the analysis of the data and the statistical results. The last and final section
presents summary, conclusions and directions for future research.
Theoretical Background and the Development of Hypotheses

This study attempts to investigate the relationship between firm structure
and profitability at Jordan Industrial Companies (JIC), taking into
consideration the major firm characteristics such as, firm size, firm age, debt
ratio, and ownership structure. This prevailing view can be traced from the
two basic paradigm notions, i.e., collusion hypothesis and the efficient
market hypothesis. The traditional notion or the collusion hypothesis follows
the structure-conduct-performance paradigm. According to this hypothesis,
firm profitability depends to monopolistic conduct, and this conduct depends
on industry structure. This conduct enables firms to set prices above the
costs, thus, making abnormal profit. The pioneering work of (Bain, 1951),
and (Barney, 1991) lays two assumptions of this paradigm notion. First, the
firm is considered homogeneous in terms of strategically relevant resources,
and secondly, an attempt to develop resource heterogeneity has no long-term
viability due to high mobility of strategic resources among firms.
On the other hand, efficient market hypothesis argued the traditional
theory (efficient market theory) postulating that firms’ profitability depends
on a proxy relationship between superior efficiency, market share, and
concentration. (Porter, 1991) has noted that firm profitability can be
decomposed into effects steaming from industry structural characteristics
and the firms’ strategic positioning within its industry.
Extending the argument, this study is a logical approach to add to this
literature, in studying the impact of firm structure to profitability by
41
Dr. Abdulsalam Abu-Tabanjeh June 2006
examining the major factors such as firm size, firm age, debt ratio, and
ownership structure. The following is a separate discussion for each factor
leading to the development of the hypotheses:
Firm Size and Profitability

A good number of researchers had investigated the relationship between
firm size and profitability. Most of the results come out with varying
opinions. Some studies postulate negative results while some studies have
evidence supporting the positive notion. (Amato & Wilder, 1985) conveyed
that the relationship between firm size and profitability may be positive for
some firm size ranges and negative for others. Again, if the size reached a
threshold, additional expansion of firm size may further separate ownership
from control. This suggests that the relationship between firm size and
profitability can become negative beyond the threshold firm size. (Fama &
French, 1993) captured much of the cross-section of average stock returns. If
stocks are priced rationally, systematic differences in average returns are due
to differences in risk. Thus, with rational pricing, size and book equity to
market equity must proxy for sensitivity to common risk factors in returns.
(Fama & French, 1993) also attributed this predictive power of size to its
ability to capture risk. Again from the company’s perspective, small firms
apparently faced higher capital costs than larger firms. Here, we can mention
(Baumol, 1959) proposition that large firms have all of the options of small
firms, and in addition, they can invest in lines requiring such scale that small
firms are excluded. (Michaelas et al., 1999) indicated that larger firms use
higher gearing ratios than smaller firms, and they suggest this is a result of
smaller firms facing higher financial barriers. This view is also supported by
(Chittenden et. al., 1996), (Hall et. al., 2000) and (Cassar & Holmes, 2001,
2003), who provided evidence suggesting that size is positively related to
long term debt and negatively related to short-term debt. (Romano et. al.,
2001) and (Gibson, 2002), also found an important relationship between size
and capital structure. (Lopez Garacia & Aybar–Arias, 2000) suggest that size
significantly influences the self-financing of smaller companies. Contrary to
these studies, (Berk, 1997) suggests that investor returns are positively
correlated with size when size is measured with non-market measures such
as employees, assets and sales. (Leledakis, Davidson & Smith, 2004) found
that there is little correlation between firm size and profitability, while
(Hecht, 2001) conveyed that there is no correlation between non-market
measures of size and investor returns. (Jordan et. al., 1998) also found that
there is no relationship between financial structure and enterprise size.
Critical resource theories stress a firm industry control over the resources
such as assets, technology and intellectual property as determinants of firm
42
size. Legal institutions and laws improve the protection afforded the owner
of the company over these critical resources, when the size of the firm
increases (Kumar, Rajan and Zingales, 2001). Further, (Rajan & Zingales,
2000) postulated a model that proper control over the intangible factors
makes the firm profitable. Thus, they concluded that the greater the
importance of intangible factors like fixed assets, the lesser the firm is to
grow. So, firm size and profitability sometimes lead to lower profits with the
increase of size. However, small firms also need not necessarily be less
profitable than “large” firms within a given institutional environment.
Competency theories appeal that small firm can be just as profitable as a
large firm in a different competencies that leads to surplus returns. (Niman,
2003) described that “survival depends not on being better, but rather on
being sufficiently different, so that the advantages of others do not prove
fatal”. (Dhawan, 2001) actually did find a negative relation between firm
size and profitability for U.S. firms during “1970 to 1989” but at a highly
aggregated level of services and manufacturing.
Thus, from these existing theories and past research, it can be concluded
that effect of firm size and profitability comes out with mixed results. Some
studies conclude with negative relation, and some says no relation exists
between profitability and firm size. Further, the above review also shows
that profitability initially declines and then levels off or increases.
The firm size can be measured in a number of ways, the commonly used
measures are assets, sales, numbers of employees, and value added.
Technological theories of the firm used assets or sales as a measure of firm
size. In this study, firm size is measured by the log of sales. The researcher
choose sales turnover because of its feasibility. It is also less prone to having
measurement errors compared with other commonly used measures of firm
size like net assets.
Thus, from this theoretical background, the researcher advances the
following hypothesis.
Hypothesis 1: Firm Size Positively Affects Profitability.
Ownership Structure and Profitability

Ownership structure defines the institutional basis for power relationships
between individuals within the organization and dealings with other
organizations (Bowels, 1984). Company’s capital structure decision should
be properly analyzed and balanced to maximize the firm profitability. The
owners being the equity shareholders of the company and the providers of
risk capital would be concerned about the ways of financing a company’s
operations. There may also be a conflict of interest among shareholders, debt
holders and management. Conflicts between shareholders and managers may
43
arise on two counts. Firstly, managers may transfer shareholders wealth to

their advantage by increasing their compensation and perquisites. Secondly,
managers may not act in the best interest of shareholders to protect their
jobs. Managers may not undertake risk and go for profitable investments.
(Freeman & Lomi, 1994) claim that ownership rights system included in
organizational structure plays an important role given that it generates
collective behavior and drives individuals to control and promote their own
interests.
Based on ownership structure, firms can be classified as co-operative
companies and capitalist companies. In the capitalist company, the
underlying motivation is the possibility for owners to obtain benefits on the

investment made in the business. However, in a co-operative company, the
main incentive is the satisfaction of a common socio-economic necessity. In
the co-operative company, the organizational power is related to the
individual, through participating in the social objectives of the co-operative
company where expectations are fulfilled and the need is satisfied, whereas,
in the capitalist company the roles of supplier, entrepreneur and client are
normally played by different individuals. (Locke & Schweiger, 1979) and
(Schweiger & Leana, 1986) postulated the existence of a positive
relationship of participation and the level of satisfaction and commitment on
the part of the members.
Recent studies also postulated the fact that the agency problem is
expropriation of minority shareholders by the controlling owners rather than
the conflict of interest between managers and dispersed shareholders.
However, (Morck, 2004) conceded that in countries with weak institutions
(education system, courts, financial regulators, and organ of government),
family ownership and pyramidal control are more desirable than dispersed
ownership because the managers can simply loot the firm, with no concern
for its future or for the wealth of its shareholders. (Arnold, 1998), in his
study concluded that there is an increased probability of the firm with high
gearing levels.
Jordan as a developing country had one of the largest stock markets in the
region, i.e., Amman Stock Exchange (ASE). It capitalizes more than US $ 7
Billion in 2003. In 2004, the exchange listed 199 companies and has more
than 500,000 investors (Jordanian Shareholding Company's Guide, 2004)
Jordanian corporate and individual investors hold 54% of the shares
where the rest is held by the government. Foreign investors account for 40%
of share ownership. Investors enjoy the benefits of no withholding taxes, no
taxes on dividends, and free repatriation of funds. Further, ASE listed firms
that have no ownership limitation of any kind. For the purpose of this study,
the researcher measured the ownership structure by Government Ownership,
44
Non-government Ownership, and Others Ownership. Here, Government

Ownership includes government owned firms and government agencies firm,
Non-government firms includes private companies ownership and individual
ownership, whereas Arab investors and Foreign investors comes under
Others Ownership.
Thus, from the above reviews and discussion, the researcher proposes the
Hypothesis 2: Firm Ownership Structure Positively Affects Profitability.
Debt Ratio and Profitability

A firm can avoid the risk of financial distress if it can maintain its ability
to meet contractual obligation of interest and principal payments. A bad debt

ratio is not necessarily bad. Debt has its merits and demerits. It saves taxes
since interest is a deductible expense and at the same time it can cause
financial distress also. If a firm can service high debt without any risk, it will
increase shareholders wealth. On the other hand, a low debt ratio can prove
to be burdensome for a firm, which has liquidity problem. In all, a firm
should employ debt according to its capacity without servicing any problem.
The stability of cash flows reduces the risk of insolvency and enhances the
capacity of the new entity to service a larger amount of debt. The increased
borrowing allows a higher interest tax shield, which adds to the shareholders
wealth. Many studies had been found favoring the above idea.
In contrast to the above ideas, the study of (Graham, 2000) estimated the
magnitude of debt benefit. He pointed out that taxes benefit of US $ 0.2 for
each unit of profit before taxes or the equivalent to 10% of the firm’s value,
which are still below the potentially maximum benefit. Furthermore, he
concludes that big and profitable companies present a low debt rate. He also
pointed out that large companies, which have means to offer good
collaterals, usually find relatively lower financial costs, which does not mean
that they have a high debt level. Besides these factors, a lot of firms can opt
to maintain flexibility reserves, using debt with below their potential
devising a possible future need. The study done by (Fama & French, 1998)
concluded that the debt does not concede taxes benefits. Besides, the
leverage degree generates agency problems among shareholders and
creditors that predict negative relationships between leverage and
profitability. Thus, the negative information relating debt and profitability
observe the tax benefit of the debt. Cash flow analysis indicates how much
debt a firm can service without any difficulty. (Modigliani & Miller, 1963)
affirmed that fiscal legislation allows the firm to deduce of the operational
profit the amount expended in the payment of interests, the value of the tax
levy on revenues would be reduced in the same proportion of the aliquot of
45
the income tax. Therefore, the profit would be smaller with comparison with
a company without debts, and as the profit will be proportional to a smaller
equity, the profit per share tends to be larger. (Brealey and Myers, 1992)
claim that if the cost of the debt is lesser than the cost of equity, the firm
with larger financial leverage tends to present, in normal conditions of
operation, higher indexes of profitability on equity. (Myers, 1984) conveyed
that profitable firms are less likely to borrow because of their preference for
and the rewards of retaining earnings. (Chittenden et. al., 1996), (Michaelas
et. al., 1999) and (Cassar & Holmes, 2003) also supported the idea of Myer.
They indicate that profitability is negatively related to total gearing.
(Gedajlovic et. al, 2003; Lincoln et. al, 1996) also suggest that firms with
higher level of debt earn less profitability. (Hall et. al., 2000) suggest that
profitability is not statistically significantly related to long-term debt.
(Jordan et. al., 1998) argued and gave no support for the negative impact of
debt on profitability.
From the above reviews, the researcher concludes that most of the studies
support the general notion that lower debt level decreases the risk of
solvency with increases of profitability to a firm. In this study, debt ratio is
defined as total debt by total assets. In order to test this general notion, the
researcher postulates the following hypothesis.
Hypothesis 3: Debt Ratio Positively Affects Profitability.
Age and Profitability

The hypothesis of age influence on organizational structure is put forward
in organizational theory. It is considered that the older the firm, the
organization will be more stable in nature. The firm will benefit more
developed activity because of its more experience business. A number of
studies had been found accepting and favoring this view. The work of
(Chittenden et. al, 1996) postulated that younger firms rely more on short-
term finance than more mature firms, as a result of a positive relationship
between age and profitability. The study furthermore suggests that the use of
both short-term and long-term debt falls with age. (Hall et. al, 2000) also
favor this idea. (Michaelas et. al, 1999) postulated that younger firms have
higher average gearing ratios than older firms because the latter being more
profitable and having accumulated internal sources. (Romano et. al, 2001)
found that business age is not a significant predictor of debt as a source of
financing.
Thus, according to this literature and in order to verify the same results
for the Jordanian industrial companies, the researcher postulates the
Hypothesis 4: Firm Age Positively Affects Profitability.
46
Research Methodology
The researcher employed the industrial companies listed on the Amman
stock Exchange. For a homogeneous selection and accurate results of the
analysis, the researcher excluded companies under liquidation and those
established after 1995, i.e., the beginning of the year under study. Thus, the
final number of the sample employed for the study included 48 industrial
companies. The sources of data consist of the annual balance sheets, income
statements and audit reports of the selected industrial companies. Other
relevant data which were not available in the above sources were taken from
the Jordanian Shareholding Company's Guide. The present study is confined
to the period of one decade, i.e., from 1995 to 2004. The main reason behind
selecting this period is data availability.

The aim of this study is to examine the relationship between firm
structure and profitability. Many researchers use different measures of firm
profitability in the analysis of the relationship between firm structure and
profitability. The profitability measures mostly used in empirical studies are
Rate of Return on Equity (ROE), Rate of Return on Capital (ROC), or Rate
of Return on Investment (ROI). The researcher used ROI and ROE.
The Return on Equity (ROE) is calculated as Net Profit after Tax by Total
Shareholders Equity. This ratio shows the profit attributable to the amount
invested by the owners of the business. It shows potential investors into the
business what they might hope to receive as a return. The stockholder’s
equity includes share capital, share premium, distributable and non-
distributable reserves. The Return on Investment (ROI) is calculated as Net
Profit after Tax by Net Assets. The rate of return on investment indicates the
degree of efficiency with which management has used the assets of the
enterprise during an accounting period. Most scholars primarily focus on
these two factors to measure financial performance and operating
performance. The current study use correlation analysis to identify the
association between profitability and the independent variables, as well as
regression analysis to estimate the causal relationship.
The Models
The researcher considered the following regression models:
Model 1: ROI as the Dependent variable

( ) ( ) (
ROI = α0 f, y +β logsize f, y +β logage f, y +β debt f, y +β 4
1 2 3
)
( ) ( ) (
non − govow f, y +β govow f, y +β othow f, y + l f, y
5 6
)
47
Model 2: ROE as the Dependent variable

( ) ( )
ROE = α0 f, y +β logsize f, y +β logage f, y +β debt f, y +β 4
1 2 3
( )
( ) ( )
non − govow f, y +β govow f, y +β othow f, y +l
5 6
(
f, y
)
where
ROI : measures the parental corporations’ financial profitability,

with profit after tax by net assets for firm ( f ) in year ( y ),
ROE : measures the parental corporations’ financial profitability, with profit
after tax by total shareholder’s equity for firm ( f ) in year ( y ),

α 0 f,y : constant term for firm ( f ) in year ( y ),
β : regression coefficients.
logsize f,y : logarithms of the firm size (total sales) for firm ( f ) in year ( y ),
logage f,y : logarithms of the firm’s age for firm ( f ) in year ( y ),
debt f,y : debt ratio (total debt by total assets) for firm ( f ) in year ( y ),
non- govow f,y : non-government ownership (represent private companies
ownership and individual ownership) for firm ( f ) in year ( y ),
govow f,y : Government ownership (represent government owned firms
and government agency firms ) for firm ( f ) in year ( y ),
othow f,y : other ownership (represent Arab investors and foreign investor )
for firm ( f ) in year ( y ),
l f,y : disturbance term for firm ( f ) in year ( y ).
Results and Interpretation

Table 1 shows some descriptive statistics for the dependent and independent
variables, while Table 2 shows the correlation coefficients.
48
-0.302**
-0.097*
Othow
STD 0.088 0.173 0.310 0.761 0.228 0.180 0.185 0.074
-0.018
-0.067
0.040
0.023
0.085
1.000
All
June 2006
Samples Mean 0.084 0.154 1.256 6.676 0.361 0.098 0.840 0.061
STD 0.082 0.193 0.221 0.800 0.212 0.147 0.163 0.069
-0.412**
-0.325**
-0.317**
Table (2): Pearson Correlation Coefficient Matrix (n = 48)
govow
-0.085
2004
Non-
0.088
0.075
1.000
* significant at the 0.05 level (2-tailed), ** significant at the 0.01 level (2-tailed),
Mean 0.072 0.131 1.377 6.744 0.272 0.077 0.865 0.054
STD 0.085 0.212 0.232 0.785 0.365 0.152 0.163 0.069
2003
Table (1): Descriptive Statistics (n = 48)
Govow
Mean 0.091 0.184 1.356 6.701 0.377 0.080 0.868 0.048
0.456**
0.346**
-0.092*
-0.084
0.065
1.000
STD 0.093 0.211 0.254 0.733 0.232 0.180 0.186 0.080
2002
Mean 0.093 0.192 1.308 6.712 0.370 0.095 0.838 0.067
0.364**
0.120**
-0.077
STD 0.056 0.190 0.257 0.735 0.248 0.184 0.192 0.082
0.040
1.000
Debt
2001
Mean 0.084 0.165 1.309 6.712 0.381 0.096 0.837 0.067
STD 0.067 0.189 0.272 0.756 0.225 0.187 0.191 0.082
Logage Logsize
0.288**
-0.055
-0.086
2000
1.000
49
Journal of Economic & Administrative Sciences
Mean 0.092 0.189 1.283 6.700 0.387 0.099 0.827 0.075

STD 0.053 0.147 0.290 0.731 0.190 0.186 0.189 0.074
1999
-0.056
Mean 0.074 0.144 1.254 6.682 0.377 0.098 0.833 0.069
0.024
1.000
1998 STD 0.050 0.097 0.311 0.701 0.173 0.187 0.186 0.068
0.584**
Mean 0.062 0.108 1.222 6.758 0.355 0.106 0.832 0.065
ROE
1.000
STD 0.060 0.094 1.187 6.757 0.360 0.112 0.821 0.066
1997
Mean 0.060 0.094 1.187 6.757 0.360 0.112 0.821 0.066
1.000
ROI
STD 0.064 0.093 0.369 0.724 0.186 0.195 0.197 0.070
1996
Mean 0.069 0.100 1.146 6.703 0.352 0.110 0.834 0.055
Non-govow
STD 0.145 0.148 0.412 0.887 0.205 0.186 0.191 0.077
Logsize
1995
Logage
Govow
Othow
Mean 0.137 0.203 1.097 6.284 0.384 0.099 0.843 0.057
ROE
Debt
ROI
Non-
Variable ROI ROE Logage Logsize Debt Govow
Govow
Othow
Table 2 shows that firm age, debt ratio, and non-government ownership have
positive insignificant correlation, whereas firm size, government ownership, and
other ownership structure have a negative insignificant correlation with ROI.
However, debt ratio has a positive significant correlation and government
ownership have a negative significant correlation with ROE. This indicates that
the more shares the government owned for the companies, the more negative
impact on profitability.
For more concrete results, Table 3 shows the results of estimating the
regression equation of ROE for the pooled sample with the overall period of the
years under study as well as for each year separately. The values of R square
and F test are also given.

Table 3 shows that firm size has no significant effects on profitability
measured by ROE, showing a consistent basis during the years of the study.
However, in the overall pooled sample, firm size showed significant negative
relation with profitability (ROE). This effect is multiplied when the firm size is
large, evidenced by the significant negative coefficient of logsize. This could be
due to the changes in output either because of increased demand or reduction of
costs. The reduction in costs could come directly from more productive capital
equipment, while increased demand could stimulate expansion on the part of the
firm, hence affect profitability. Thus, the current study does not support
Hypothesis 1, as the effect of size on profitability, measured by ROE, is
significantly negative at the 0.05 level. We mention here the study of
(Szymanski et. al, 1993) who found a negative association between firm size
and profitability. In the same vein, (Peltzman, 1977), (White, 1982), and (Porter,
1980) argued that rapid expansion of firm size ensures incumbent strong
financial performance even in the presence of market share gains from new
entrants.
As far as debt ratio’s relation with profitability of the selected Jordanian
industrial companies is concerned, there was a significant positive relation
during the years 1999-2003 as well as for the pooled sample. This indicates a
high positive influence on profitability, confirming Hypothesis 3. This result
conforms to the conclusions of (Modigliani and Miller, 1963), and (Hadlock and
James, 2002) who interpret the loan as a positive step, imagining that the
company preferred that type of financing because it anticipates high returns.
Thus, the selected industrial companies of Jordan might have depended upon the
external funds to operate the necessary working capital finance rather than to
finance from internal operation.
It is also apparent from Table 3 that firm age has no significant effects on
profitability measured by ROE, showing a consistent basis during the years of
the study. Thus, the current study does not support Hypothesis 4.
50
t-statistics
have low non-significant impact on profitability in separate years as well as

in the pooled sample. It also highlights that for all the ownership structures,
Furthermore, Table 3 shows that the ownership structures, measured by
government ownership, non-government ownership and other ownership,
consequence of economic crisis and unstable period of time. However, in

there was a negative impact in 1996, 1997, 2000 and 2001. This might be a
June 2006
-0.085 1.098 -2.428 8.703 0.243 0.406 0.411

Table (3): Regression Analysis for Firm Structure and Profitability
All
Samples -0.051 0.031 -0.027 0.294 0.147 0.248 0.251 14.139 0.158
β
t-statistics -1.132 -0.426 -0.785 0.074 1.313 1.288 1.229

2004
(Model 1 – ROE, as the dependent variable) (n=48)
-3.865 -0.071 -0.035 0.011 4.480 4.343 4.099 0.547 0.078

β
t-statistics -1.122 0.116 -0.500 4.161 1.152 1.208 1.041

2003 3.597 0.356
-3.314 0.017 -0.021 0.317 3.418 3.546 3.031
β
t-statistics -0.163 0.095 -0.346 2.557 0.146 0.226 0.167

2002 1.417 0.179
-0.513 0.018 -0.022 0.437 0.479 0.739 0.547
β
t-statistics 0.834 0.589 -0.597 4.765 -0.826 -0.756 -0.828

2001 4.533 0.411
2.158 0.065 -0.026 0.484 -2.252 -2.060 -2.240
β
t-statistics 1.481 1.016 -1.647 6.630 -1.287 -1.348 -1.169

2000 8.641 0.571
0.091 -0.056 0.657 -2.757 -2.972 -2.570
β
51
t-statistics -0.061 1.173 -2.534 4.657 0.267 0.301 0.634

1999 5.273 0.448
-0.093 0.091 -0.085 0.504 0.407 0.473 0.993
1998
β
t-statistics -0.689 1.240 -0.864 1.843 0.667 0.778 0.980
1.373 0.174
-0.729 0.070 -0.024 0.176 0.717 0.844 1.100
β
t-statistics 1.292 1.321 .6620 -0.555 -1.449 -1.323 -1.050
1997 1.148 0.150
0.979 0.054 0.015 -0.041 -1.134 -1.039 -0.828
β
t-statistics 0.620 2.884 -0.784 0.937 -0.622 -0.518 -0.687
1996 1.669 0.204
0.574 0.134 -0.020 0.072 -0.599 -0.501 -0.658
β
t-statistics -0.108 -1.663 0.053 0.663 0.271 0.270 0.187
1995 0.727 0.101
-0.196 -0.105 -0.196 0.075 0.485 0.484 0.333
β
Variable R
Name
Constant Logage Logsize Debt Govow Non-govow Othow F value
Square
general, ownership structure does not show a significant impact on the

profitability performance, and Hypothesis 2 is not supported.
Thus, it can be concluded from Table 3 that firm size has negative
impact, while debt ratio has a high positive impact. In contrast, firm age and
ownership structure have almost no impact on profitability.
Furthermore, in order to test the influence of the independent variables on
profitability, measured by ROI, and to see how far this supports the results of
Table 3, the researcher extended the regression analysis using Model 2.
Table 4 describes the results of estimating the regression equation of
profitability measured by ROI for the pooled sample as well as for each year
separately.
Table 4 shows firm age and firm size with no significant effect on
profitability measured by ROI. However, the overall pooled sample shows a
positive effect for firm age and a negative effect for firm size on profitability
(ROI). These results confirm and support the former results of Table 3.
As far as debt ratio is concerned, its effect on ROI is in total contrast to
that on ROE. The table shows mixed results with a significant negative
impact in 1997 and a significant positive impact in 2001 and 2003.
Viewing the pooled sample, a very low insignificant positive impact is
found for ownership structure on profitability (ROI). This result comes out
similar and confirms the results of Table 3. However, in 2001 a negative
significant result is shown, while 2003 shows positive significant results.
Again, viewing the overall pooled sample, non-government ownership
shows a slight impact on profitability as was also found in Table 3. Thus, in
a general conclusion, ownership structure has almost no influence on
profitability, therefore supporting and confirming the regression results of
profitability measured by ROE.
Summary and Conclusion

The primary aim of this study was to test the postulated hypotheses and
to provide evidence with respect to the impact of firm structure to firm
profitability, by examining such major factors as firm size, firm age, debt
ratio and ownership structure. In this specific case of Jordan economy, the
difficulties are enlarged due to the unstability of the economic environment.
This country went through a process of monetary adjustment and economic
crisis, which also has an impact due to the uncertainty of the local economy
as well as the external unstable environment.
The study employed two model specifications in order to test the
hypotheses, using profitability measured by the Rate of Return on Equity
(ROE) and the Rate of Return on Investment (ROI) along with other
independent variables, for the selected Industrial Companies of Jordan.
52
t-statistics
level in Table 3. Thus, this result does not support the formulated Hypothesis
It was hypothesized that larger size firms receive more attention from
1999; Chittenden et. al, 1996; Hall et. al, 2000; Cassar & Holmes 2001,
2003). However, a significant negative impact has been found at the 0.05
profitability. This idea is supported by (Baumol, 1959; Michaelas et. al,
1. However, this conclusion is in conformance with the work of (Dhawan,

analysts and investors with a larger more option, and hence increased
June 2006
All -0.053 1.773 -1.005 1.274 0.147 0.320 0.221

1.372 0.018
Table (4): Regression Analysis for Firm Structure and Profitability
Samples -0.017 0.027 -0.006 0.024 0.049 0.107 0.074

β
t-statistics -0.962 0.168 -0.012 -0.946 1.017 1.035 0.946

2004
-1.396 0.012 0.000 -0.062 1.475 1.483 1.341 0.539 0.077
β
(Model 2– ROI, as the dependent variable) (n = 48)
t-statistics -2.649 0.098 0.049 3.814 2.649 2.705 2.758

2003 3.979 0.380
-3.095 0.006 0.001 0.115 3.109 3.142 3.176
β
t-statistics -0.010 0.347 0.229 -0.457 -0.060 0.023 -0.049

2002 0.296 0.044
-0.018 0.039 0.009 -0.045 -0.114 0.044 -0.093
β
t-statistics 2.243 0.024 0.753 2.043 -2.208 -2.144 -2.118

2001 1.669 0.204
1.968 0.001 0.011 0.070 -2.043 -1.983 -1.944
β
t-statistics 1.650 -0.222 -0.628 1.748 -1.292 -1.464 -1.428

2000 2.244 0.257
1.628 -0.009 -0.010 0.081 -1.296 -1.511 -1.470
β
53
t-statistics -0.662 1.349 -1.809 0.896 0.817 0.897 0.999

1999 1.021 0.136
-0.447 0.047 -0.027 0.043 0.558 0.630 0.700
1998
β
t-statistics -0.942 1.216 0.275 -0.626 0.778 0.923 1.070
0.874 0.119
-0.530 0.036 0.004 -0.032 0.444 0.532 0.638
β
t-statistics 1.247 1.635 0.631 -2.405 -1.359 -1.222 -1.039
1997 2.093 0.244
0.605 0.043 0.009 -0.114 -0.681 -0.615 -0.525
β
t-statistics 1.152 1.915 -1.120 1.007 -0.993 -0.924 -1.101
1996 1.096 0.144
0.759 0.064 -0.020 0.055 -0.681 -0.636 -0.751
β
t-statistics -0.518 1.245 0.832 -1.430 0.451 0.522 0.316
1995 1.111 0.146
-0.901 0.075 0.025 -0.153 0.767 0.892 0.537
β
Variable Non- R
Name
Constant logage Logsize Debt Govow govow
othow F value
Square
2001) who also found a negative relationship between firm size and
profitability.
Further, ownership structure has almost no impact on profitability.
However, the non-government ownership shows a little impact albeit not
significant. This could result in what (Johnson et. al, 2000) called the
“tunneling” effects where the controlling shareholders transfer out resources
from the firm for their own private benefits at the expense of minority
shareholders. The result does not fully support the postulated Hypothesis 2,
that firm ownership had a positive impact on profitability as it has only a
very low insignificant positive impact.
Furthermore, the current study extends the very interesting discussion

about the influence of debt ratio on firm profitability. Many researches give
mixed results on such a relationship. Studies like (Graham, 2000; Myers,
1984; Chittenden et. al, 1996; Michaelas et. al, 1999; Cassar & Holmes,
2003) provided that profitable companies present a low debt rate, whereas
(Fama & French, 1998; McNutty et. al, 2002) concluded that debt does not
concede tax benefits. The results of this study shows that debt had a great
positive impact on profitability as shown in Table 3, even though Table 4
shows a much lower impact. This could be a result from the lack of
indicators that could approximate idiosyncratic firm competencies such as
organizational knowledge or instability of the monetary rate politics. The
uncertainty of the local economy as well as external instable environment
might also convey operational and financial risks that hinder the managerial
planning and encourage the adoption of more risky debt politics. Hence, this
result supports the formulated Hypothesis 3, that debt ratio positively affects
firm profitability.
Referring the firm age as a variable affecting the profitability, the study
shows an insignificant result which implied that firm age does not affect the
profitability of a firm. Therefore, Hypothesis 4 was not supported.
In Conclusion, these findings have an interesting policy implication,
which may add to the ongoing debate on the issues of firm structure and the
firm profitability relations. The empirical findings of this study suggest that
firm structure emerges as an important factor affecting profitability.
However, the results indicate that some of the independent variables
considered in this study have weak impacts on profitability. These findings
should be useful to the managerial authorities to decide on the extent to
which firm structure needs to be monitored and controlled. Specifically, the
results appear to indicate that debt ratio is a useful factor influencing firm
performance. Provided these finding are confirmed in national contexts, it is
suggested that smoothing and successful firms’ improvement rely much on
the effectiveness of the national level policies and plans for structural
54
adjustment on specific actions. The validity and the generalization of the

conclusions mentioned are pending future research in other industries or
sectors that ratifies or refutes them.
As for limitations, this study measured firm size by sales and the choice
of firm age, debt ratio, ownership structure and firm size as the only
independent variables affecting profitability was dictated by the available
data sources. The database employed is unique and reliable consisting of the
annual balance sheets, income statement, audit reports, and Jordanian
shareholding company's guide. The measurements of profitability are
consistent with those used in previous studies, using Return on Investment
(ROI) and Return on Equity (ROE).
Given the limitations mentioned above, there are several lines of research
which could be undertaken as a follow up on this paper: (a) adding more
variables to study the relationships between firm structure and profitability,
(b) improved ways to measure / detect profitability as well as investigate it in
different contexts, e.g., different time periods, economic cycles, or stock
exchange, and (c) Examination of the impact of industrial market structure
and firm conduct in a homogeneous sample.
55
References
Amato, L., and Wilder, R.P., (1985), The Effect of Firm Size on Profit Rate in
U.S. Manufacturing, Southern Economics Journal, 52 (July), pp. 181-190.
Amman Financial Market, Jordanian Shareholding Company's Guide, Jordan,
2004.
Arnold, G., (1998), Corporate Financial Management (1st ed), U.K.: Financial
Firms, Pitman Publishing.
Bain, J., (1951), Relation of Profit Rate to Industry Concentration: American
Manufacturing, 1936-1940, Quarterly Journal of Economic, 65, pp. 293-
324.
Bain, J., (1956), Barriers to New Competition, Harvard University Press:

Cambridge, M.A.
Barney J., (1991), Firm Resources and Sustained Competitive Advantage,
Journal of management, 17: pp. 99-120.
Baumol, W.J., (1959), Business Behavior, Value, and Growth, (New York:
MacMillan).
Berk, J.B., (1997), “Does Size Really Matter?”, Financial Analysts Journal,
53, pp. 12-18.
Bowels, R., (1984), Property Right and the Legal System, in : E, Dwhynes
(ed.), GAT is Political Economy, New York, Basil Blackwell, pp. 187-
208.
Brealey, R.A., Myers, S.C., (1992), Principios de Financas Empresariais
Lisboa. Ed, Mcgraw – Hill de Portugal.
Cassar, G., and Holmes, (2001), Capital Structure and Financing of SMEs:
Australian Evidence, Paper Presented to the Annual Conference of the
Accounting Association of Australia and New Zealand,
Cassar, G., and Holmes, (2003), Capital Structure and Financing of SMEs:
Australian Evidence, Accounting and Finance Journal, 43 (2), pp. 123-
147.
Chittenden, F., Hall, G., and Hutchinson, P., (1996), Small Firm Growth,
Access to Capital Markets and Financial Structure: Review of Issues and
Empirical Investigation, Small Business Economics, 8 (1), pp. 59-67.
Chu, E. Y., and Cheah, K., (2004). The Determinants of ownership structure in
Malaysia. The Malaysian Finance Association 6th Annual Symposwm 5-6
May. Langkawi Jabaatan Penerbitan dan Teknologe Media – Universiti
Utara Malaysia.
Demsetz, H., (1973), Industry structure, marker Rivalry and Public Policy,
Journal of Law and Economics, 16, pp. 1-19.
Dhawan, R., (2001), Firm Size and Productivity Differential: Theory and
Evidence From a Panel of US Firms, Journal of Economic Behavior and
Organization, 44, pp. 269-293.
56
Fama, Eugene, F., and Kenneth, R. French, (1993), Common Risk Factors in
the Returns on Stocks and Bonds, Journal of Financial Economics, 33, pp.
3-56.
Fama, E. F.; French, K. R. (1998), Financing Decision and Firm Value, The
Journal of Finance, V. LIII, n 3.
Freeman, J., and Lomi, A., (1994), Resource Positioning and Founding of
Banking Co-operatives in Italy, in: J.A.C., Baum and Singh J.V. (edu.),
Evolutionary Dynamics of Organizations (New York, Oxford University
Press, pp. 259-263.
Gedajlovic, E.R., D.M., Shapiro, and Buduru., B., (2003), Financial
Ownership, Diversification and Firm Profitability in Japan, Journal of
Management and Governance, Vol. 7, pp. 315-350.

Gibson, B., (2002), Clusters of Financial Structure in Australian Small
Firms’, Small Enterprise Research: The Journal of Seaanz, 10 (1), pp. 59-
74.
Hadlock, C.J.C. James, C.M., (2002), Do banks provide financial stock? The
Journal of Finance, V.LVII, n3, June 2002.
Hall, G., Hutchinson, P., and Michael, M., (2000), Industry Effects on the
Determinants of Unquoted SME’ Capital Structure, International, Journal
of the Economics of Business, 7 (3), pp. 297-312.
Hecht, Peter Andrew, (2001), The Cross Section of Expected Firm (not
Equity), Return. (June, 26, AFA, New Orleans.
Jordan, J., Lowe, J., and Taylor, P., (1998), Strategy and Financial Policy in
U.K. Small Firms, Journal of Business Finance and Accounting, 25 (1-2),
pp. 1-27.
Kumar, K.B. and R.G. Rajan, and L. Zingales, (2001), What Determines Firm
Size, Working Paper, University of Chicago.
Leledakis, G., I., Davidson and J. Smith, (2004), “Does Firm Size Predict
Stock Returns?”, Evidence fro the London Stock Exchange,” EFMA
2004 Basel Meetings Paper.
Lincoln, J.R., M.L., Gerlach, and C.L., Ahmadjian (1996), Reiretsu Networks
and Corporate Performance in Japan, American Sociological Review,
Vol., 61, pp. 67-88.
Locke, E., and Schweiger, D.M., Participation in Decision-Making, One more
Look, in : L.L., Cummings and Staw. B.M., (edu.), Research in
Organizational Behavior (Greenwich, 1979), pp. 265-339.
Lopez – Garcia, J, and Aybar-Arias, c., (2000), An Empirical Approach to the
Financial Behavior of Small and Medium Sized Companies, Small
Business Economic Journal, 12 (2), pp. 113-130.
Mason, E., (1993), Price and Production Policies of Large – Scale Enterprises,
American Economic Review, 29, (Suppl. 29), pp. 61-74.
57
McNutty, J.J.;Yeh, T.D.; Schulze, W.S.C.; Lubatkin, M.H., (2002), What’s its
Real Cost of Capital ? Harvard Business Review, V.N., Oct., 2002.
Michaelas, N., Chittende, F., and Poutziouris, P., (1999), Financial Policy and
Capital Structure Choice in U.K. SMEs; Empirical Evidence from
Company Panel Data, Small Business Economics Journal, 12 (2), pp.113-
130.
Morck, R., m., (2004), Corporate Governance and Family Control, Discussion
Paper no. 1.
Myers, S.C., (1984), The Capital Structure Puzzle, The Journal of Finance, 39
(3), pp. 575-592.
Niman, N., (2003), The Evolutionary Firm and Cournot’s Dilemma,

Cambridge Journal of Economics.
Peltzman, S., (1977), The gains and Losses from industrial concentration,
Journal of Law and Economics, 20: pp. 229-263.
Porter, M., (1980), Competitive Strategy: Techniques for Analysing Industries
and Competitors, Frce Press: New York.
Porter, M., (1991), Towards a Dynamic Theory of Strategy, Strategic
Management Journal, Winter Special Issue, 12, pp. 95-117.
Rajan, R, and L. Zingales, (2000), The Firm as a Dedicated Hierarchy, A
Theory of the Origins and Growth of Firms, NBER Working Paper No.,
W7546.
Romano, C.A., Tanewski, G.A., and Smyrnois, K. X., (2001), Capital
Structure Decision Making: A Model for Family Business, Journal of
Business Venturing, 16 (3), pp. 285-310.
Schweiger, D.M., and Lean, C.R., Participation in Decision-Making, In E.A.,
Locke (ed), Generalizing from Zoboratory to Field Studies (1986), pp.
147-166.
Szymanski, D. M., Bharadwaj, S. G., Varadarajan, P. R., (1993), An analysis
of the market share – profitability relationship, Journal of Marketing, 57:
pp. 1-18.
White, L., (1982), The determinants of the relative importance of small
business. Review of Economics and statistics, 64 (February): pp. 42-49.
58
‫‪Journal of Economic & Administrative Sciences‬‬ ‫‪June 2006‬‬
‫ﺩﺭﺍﺴﺔ ﺘﻁﺒﻴﻘﻴﺔ ﻋﻥ ﺍﻟﻌﻼﻗﺔ ﺒﻴﻥ ﻫﻴﻜل ﺍﻟﻤﺅﺴﺴﺔ ﻭﺭﺒﺤﻴﺘﻬﺎ ‪ :‬ﺤﺎﻟﺔ ﺍﻷﺭﺩﻥ‬
‫ﺩ‪ .‬ﻋﺒﺩ ﺍﻟﺴﻼﻡ ﻤﺤﻤﻭﺩ ﺃﺒﻭﻁﺒﻨﺠﺔ‬

‫ﻜﻠﻴﺔ ﺇﺩﺍﺭﺓ ﺍﻷﻋﻤﺎل ‪ -‬ﺠﺎﻤﻌﺔ ﻤﺅﺘﺔ‬
‫ﻤﻠﺨﺹ‬
‫ﻴﻬﺩﻑ ﻫﺫﻩ ﺍﻟﺒﺤﺙ ﺇﻟﻰ ﺒﻴﺎﻥ ﺃﺜﺭ ﻫﻴﻜل ﺍﻟﺸﺭﻜﺎﺕ ﺍﻟﺼﻨﺎﻋﻴﺔ ﻋﻠﻰ ﺍﻟﺭﺒﺤﻴﺔ‪ ،‬ﻭﺘﻡ ﺍﺴﺘﺨﺩﺍﻡ ﻤﻌﺩل‬
‫)‪Downloaded by UNIVERSITAS SUMATERA UTARA At 20:42 21 June 2019 (PT‬‬
‫ﺼﺎﻓﻲ ﺍﻟﺭﺒﺢ ﻤﻨﺴﻭﺒﺎ ﺇﻟﻰ ﺤﻘﻭﻕ ﺍﻟﻤﻠﻜﻴﺔ ﻭﺼﺎﻓﻲ ﺍﻟﺭﺒﺢ ﻤﻨﺴﻭﺒﺎ ﺇﻟﻰ ﺇﺠﻤﺎﻟﻲ ﺍﻷﺼﻭل ﻜﻤﻘﺎﻴﻴﺱ ﻤﻌﺒﺭﺓ‬
‫ﻋﻥ ﺍﻟﺭﺒﺤﻴﺔ‪ ،‬ﻭﻜﺎﻨﺕ ﻤﺘﻐﻴﺭﺍﺕ ﺍﻟﺩﺭﺍﺴﺔ ﺍﻟﻤﺴﺘﻘﻠﺔ ﻫﻲ ﺤﺠﻡ ﺍﻟﺸﺭﻜﺔ‪ ،‬ﻋﻤﺭ ﺍﻟﺸﺭﻜﺔ‪ ،‬ﻨﺴﺒﺔ ﺍﻟﻤﺩﻴﻭﻨﻴﺔ‬
‫ﻭﻫﻴﻜل ﻤﻠﻜﻴﺔ ﺍﻟﺸﺭﻜﺎﺕ‪ ،‬ﻭﺸﻤﻠﺕ ﻋﻴﻨﺔ ﺍﻟﺩﺭﺍﺴﺔ ‪ 48‬ﺸﺭﻜﺔ ﻤﺩﺭﺠﺔ ﻓﻲ ﺴﻭﻕ ﻋﻤﺎﻥ ﺍﻟﻤﺎﻟﻲ ﻭﻏﻁﺕ‬
‫ﺒﻴﺎﻨﺎﺕ ﺍﻟﺩﺭﺍﺴﺔ ﻓﺘﺭﺓ ﺍﻟﻌﺸﺭ ﺴﻨﻭﺍﺕ ﻤﻥ ‪ 1995‬ﺇﻟﻰ ‪2004‬ﻡ‪ ،‬ﻭﺘﻡ ﺍﺴﺘﺨﺩﺍﻡ ﺃﺴﺎﻟﻴﺏ ﺍﻹﺤﺼﺎﺀ‬
‫ﺍﻟﻭﺼﻔﻲ ﻭﺍﻻﻨﺤﺩﺍﺭ ﺍﻟﻤﺘﻌﺩﺩ ﻻﺨﺘﺒﺎﺭ ﻓﺭﻀﻴﺎﺕ ﺍﻟﺩﺭﺍﺴﺔ‪ .‬ﻭﻗﺩ ﺘﻭﺼﻠﺕ ﺍﻟﺩﺭﺍﺴﺔ ﺇﻟﻰ ﻨﺘﻴﺠﺔ ﻤﻔﺎﺩﻫﺎ ﺃﻥ‬
‫ﺨﺼﺎﺌﺹ ﺍﻟﺸﺭﻜﺎﺕ ﺍﻟﺼﻨﺎﻋﻴﺔ ﺘﺅﺜﺭ ﻋﻠﻰ ﻤﻌﺩﻻﺕ ﺍﻟﺭﺒﺤﻴﺔ ﻓﻲ ﺸﺭﻜﺎﺕ ﺍﻟﻌﻴﻨﺔ ﺍﻟﺘﻲ ﺨﻀﻌﺕ‬
‫ﻟﻠﺩﺭﺍﺴﺔ‪ ،‬ﻭﺇﻥ ﻜﺎﻥ ﻫﺫﺍ ﺍﻟﺘﺄﺜﻴﺭ ﻀﻌﻴﻔﺎ ﻤﺎ ﻋﺩﺍ ﻨﺴﺒﺔ ﺍﻟﻤﺩﻴﻭﻨﻴﺔ‪.‬‬
‫‪59‬‬
This article has been cited by:
1. KornetaPiotr, Piotr Korneta. 2019. Critical success factors for Polish agricultural distributors. British Food Journal 121:7,
1565-1578. [Abstract] [Full Text] [PDF]
2. Ahmed Jinjri Bala, Anand Shankar Raja, Kabiru Isa Dandago. 2019. The Mediating Effect of Intellectual Capital on Corporate
Governance and Performance of Conglomerates in Nigeria. SEISENSE Journal of Management 2:3, 16-29. [Crossref]
3. Fahmi Oemar. 2018. The Influence of Corporate Governance and Corporate Funding Decisions Againts Performance and
Profitability Implications for Return on Stock. IOP Conference Series: Earth and Environmental Science 175, 012093. [Crossref]
4. Roopali Batra, Ashima Kalia. 2016. Rethinking and Redefining the Determinants of Corporate Profitability. Global Business
Review 17:4, 921-933. [Crossref]
5. Varun Dawar. 2014. Agency theory, capital structure and firm performance: some Indian evidence. Managerial Finance 40:12,
1190-1206. [Abstract] [Full Text] [PDF]
6. Siti Khadijah Ab. Manan. Empirical analysis on the relationship between debt level and SMEs profitability 1329-1333.
[Crossref]

Journal of Economic and Administrative Sciences: Article Information

Enviado por

Dados do documento

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

Journal of Economic and Administrative Sciences: Article Information

Enviado por

Direitos autorais:

Formatos disponíveis

Journal of Economic and Administrative Sciences

Users who downloaded this article also downloaded:

*Related content and download information correct at time of download.

An Empirical Study of Firm Structure and Profitability

Dr. Abdussalam Mahmoud Abu-Tapanjeh

profitability, taking into consideration major characteristics such as firm

The remainder of this paper is organized as follows. The next section

Theoretical Background and the Development of Hypotheses

Firm Size and Profitability

Ownership Structure and Profitability

arise on two counts. Firstly, managers may transfer shareholders wealth to

underlying motivation is the possibility for owners to obtain benefits on the

Non-government Ownership, and Others Ownership. Here, Government

Debt Ratio and Profitability

to meet contractual obligation of interest and principal payments. A bad debt

Age and Profitability

selecting this period is data availability.

Model 1: ROI as the Dependent variable

Model 2: ROE as the Dependent variable

ROI : measures the parental corporations’ financial profitability,

after tax by total shareholder’s equity for firm ( f ) in year ( y ),

Results and Interpretation

Mean 0.092 0.189 1.283 6.700 0.387 0.099 0.827 0.075

and F test are also given.

have low non-significant impact on profitability in separate years as well as

consequence of economic crisis and unstable period of time. However, in

-0.085 1.098 -2.428 8.703 0.243 0.406 0.411

t-statistics -1.132 -0.426 -0.785 0.074 1.313 1.288 1.229

-3.865 -0.071 -0.035 0.011 4.480 4.343 4.099 0.547 0.078

t-statistics -1.122 0.116 -0.500 4.161 1.152 1.208 1.041

t-statistics -0.163 0.095 -0.346 2.557 0.146 0.226 0.167

t-statistics 0.834 0.589 -0.597 4.765 -0.826 -0.756 -0.828

t-statistics 1.481 1.016 -1.647 6.630 -1.287 -1.348 -1.169

t-statistics -0.061 1.173 -2.534 4.657 0.267 0.301 0.634

general, ownership structure does not show a significant impact on the

Summary and Conclusion

1. However, this conclusion is in conformance with the work of (Dhawan,

All -0.053 1.773 -1.005 1.274 0.147 0.320 0.221

Samples -0.017 0.027 -0.006 0.024 0.049 0.107 0.074

t-statistics -0.962 0.168 -0.012 -0.946 1.017 1.035 0.946

t-statistics -2.649 0.098 0.049 3.814 2.649 2.705 2.758

t-statistics -0.010 0.347 0.229 -0.457 -0.060 0.023 -0.049

t-statistics 2.243 0.024 0.753 2.043 -2.208 -2.144 -2.118

t-statistics 1.650 -0.222 -0.628 1.748 -1.292 -1.464 -1.428

t-statistics -0.662 1.349 -1.809 0.896 0.817 0.897 0.999

Furthermore, the current study extends the very interesting discussion

adjustment on specific actions. The validity and the generalization of the

Bain, J., (1956), Barriers to New Competition, Harvard University Press:

Management and Governance, Vol. 7, pp. 315-350.

Niman, N., (2003), The Evolutionary Firm and Cournot’s Dilemma,

‫ﺩﺭﺍﺴﺔ ﺘﻁﺒﻴﻘﻴﺔ ﻋﻥ ﺍﻟﻌﻼﻗﺔ ﺒﻴﻥ ﻫﻴﻜل ﺍﻟﻤﺅﺴﺴﺔ ﻭﺭﺒﺤﻴﺘﻬﺎ ‪ :‬ﺤﺎﻟﺔ ﺍﻷﺭﺩﻥ‬

‫ﺩ‪ .‬ﻋﺒﺩ ﺍﻟﺴﻼﻡ ﻤﺤﻤﻭﺩ ﺃﺒﻭﻁﺒﻨﺠﺔ‬

Você também pode gostar