The Role Of Capital Structure On Profitability During Financial Crisis: An Empirical Evidence Of Financial- Firms Listed In The Iraq Stock Exchange

Abstract

The purpose of this study is to analyze the role of capital structure (CS) on profitability for a sample consisting of 27 financial firms listed on the Iraq Stock Exchange (ISE) for the period (2012-2020). The Square Fully Modified Ordinary Least Squares model (FMOLS), and the Auto Regressive Distributed Lag Model (ARDL) were resorted to estimate the parameters of the regression model.

The results reveal that the CS of the current period has a negative relationship with profitability in the light of the financial crisis. Additionally, results reveal the presence of a negative and inverse relationship between mediating variables (firm size, asset structure, growth and liquidity) and capital structure. Managers and shareholders may find these findings significant, particularly when they place a high priority on their decision about the role of capital structure on company's financial profitability during financial crisis.