The Impact of Financial Leverage on the Profitability of Industrial Companies In Light of the Corona Pandemic, Evidence from Emerging Economies

Abstract

The present study figures out the impact degree of financial leverage, measured by the ratio of liabilities to equity, on the profitability of industrial companies in light of the Corona pandemic, measured by the ratios of the return on equity and return on assets, the study population consisted of industrial companies listed in the Amman Stock Exchange amounting to (55) companies while the study sample consist of (39) companies that have data available during the study period, The descriptive analytical approach used in this study, the statistical program (SPSS) was used to analyze the study data, the mean and standard deviation were used to describe the study data, and simple regression analysis was used to test its hypotheses, the study found that there is no statistically significant impact of the degree of financial leverage on the profitability of the industrial companies listed in the Amman Stock Exchange (ASE) as measured by the return on assets, while there is a statistically significant impact to the degree of financial leverage on the profitability of the Jordanian industrial companies listed in the Amman Stock Exchange (ASE) as measured by the return on equity. The study recommended that the Jordanian industrial companies have to find an optimal capital structure; besides studying the investment opportunities before borrowing to finance them and relying on self-financing sources in the first place.