THE EFFECT OF HUMAN CAPITAL AND STRUCTURAL CAPITAL ON LEVERAGE: EVIDENCE FROM JORDAN

Abstract

This study investigates the effect of human capital and structural capital on leverage for Jordanian industrial firms from 2006 to 2020. The relevance of this topic lies in the importance of capital structure decisions for firm value and the limited research conducted on the topic in Jordan. The aim is to examine whether human capital efficiency and structural capital efficiency significantly affect leverage. The sample includes 77 industrial firms. The study employs multiple regression analysis to test the hypotheses, controlling for variables such as return on equity and firm size. The findings show that structural capital efficiency does not significantly affect leverage, but human capital efficiency and ROE have significant effects. Furthermore, the study finds that the relationship between these variables differs between large and small companies. This implies that firms with more efficient human capital tend to use less debt financing. The study concludes that human and structural capital efficiency should be considered when making capital structure decisions, as they can affect the optimal level of debt financing. The practical value is the insights for firms in Jordan and other emerging markets on optimizing their capital structure decisions by considering their human and structural capital efficiency. These results contribute to the literature on firm performance determinants in emerging economies and offer valuable information for practitioners and policymakers.