Moderating effect of competitive strategies on the relation between financial leverage and firm performance: evidence from Jordan

This study examined the moderating role of competitive strategy in the relationship between financial leverage and performance of firms based on a sample of industrial firms in Jordan between 2007 and 2016. The interaction between competitive strategy and financial leverage was revealed to influence...

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Published inBusiness and economic horizons Vol. 14; no. 3; pp. 626 - 641
Main Author Al-Rdaydeh, Mahmoud
Format Journal Article
LanguageEnglish
Published Prague Prague Development Center 01.01.2018
Subjects
Competition
Debt financing
Economy
Financial leverage
competitive strategies
firm performance
Jordan
Financial leverage
industrial firms
Online AccessGet full text
ISSN1804-5006
1804-1205
1804-5006
DOI10.15208/beh.2018.44

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Abstract This study examined the moderating role of competitive strategy in the relationship between financial leverage and performance of firms based on a sample of industrial firms in Jordan between 2007 and 2016. The interaction between competitive strategy and financial leverage was revealed to influence the effects of financial leverage towards the performance of firms in terms of return on assets (accounting-based measure) and market-to-book ratio (market-based measure). Conclusively, obtained results are in line with the notion that firms that employ cost leadership strategy experience tax advantages and increased efficiency through debt financing and/or debt covenants. This study extends the overall understanding on the effects of financial leverage towards performance of firms and how this relationship is moderated by competitive strategy among firms in an emerging market such as Jordan.
AbstractList This study examined the moderating role of competitive strategy in the relationship between financial leverage and performance of firms based on a sample of industrial firms in Jordan between 2007 and 2016. The interaction between competitive strategy and financial leverage was revealed to influence the effects of financial leverage towards the performance of firms in terms of return on assets (accounting-based measure) and market-to-book ratio (market-based measure). Conclusively, obtained results are in line with the notion that firms that employ cost leadership strategy experience tax advantages and increased efficiency through debt financing and/or debt covenants. This study extends the overall understanding on the effects of financial leverage towards performance of firms and how this relationship is moderated by competitive strategy among firms in an emerging market such as Jordan.
Author Al-Rdaydeh, Mahmoud
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SubjectTerms Competition
Debt financing
Economy
Financial leverage
Title Moderating effect of competitive strategies on the relation between financial leverage and firm performance: evidence from Jordan
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