Mohamed Abuamsha

Department of Computerized Financial and Banking Science, Palestine Technical University Kadoorie, Palestine

m.abuamsha@ptuk.edu.ps 

ORCID 0000-0002-9085-3132

Debt structure and its impact on financial performance: an empirical study on the Palestinian stock exchange

Suhair Shumali*

Department of Industrial Management, Palestine Technical University Kadoorie, Palestine

sshumali@hotmail.com 

ORCID 0000-0002-0771-8635

* Corresponding author

Abstract. The study aims to identify the impact that debt structure has on the financial performance of the organizations listed on the Palestinian Exchange (PEX). The sample of the study consists of 41 companies listed in the PEX, excluding the banking sector. The descriptive method is used, in addition to model measurement, to analyze the panel data using the multiple-regression method. The study concludes that the ROA increases when long-term debts are used for financing the assets in the insurance, investment, and industrial sectors. On the other hand, in the service sector, the ROA is negatively affected by the use of long-term debt, and only the industrial companies’ ROA is significantly affected by the total debt. Furthermore, the study finds that the ROA of companies in the insurance and investment sectors is positively impacted by short-term debts. The main recommendation is that companies in the insurance, industrial, and investment sectors should depend on properly balanced long-term debts to increase their revenue.

Received: May, 2021

1st Revision: February, 2022

Accepted: March, 2022

DOI: 10.14254/2071-8330.2022/15-1/14

JEL Classification: G32, F3, G12, L25

Keywords: capital structure, debt structure, ROA, financial performance