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

Author

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  • Al-Rdaydeh, Mahmoud
  • Almansour, Ammar Yaser
  • Al-mari, Mohammad Ahmad

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.

Suggested Citation

  • Al-Rdaydeh, Mahmoud & Almansour, Ammar Yaser & Al-mari, Mohammad Ahmad, 2018. "Moderating effect of competitive strategies on the relation between financial leverage and firm performance: Evidence from Jordan," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 14(3), May.
    • Handle: RePEc:ags:pdcbeh:287219
    DOI: 10.22004/ag.econ.287219
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    Cited by:

    1. Feras Izzat Kasasbeh, 2021. "Impact of financing decisions ratios on firm accounting-based performance: evidence from Jordan listed companies," Future Business Journal, Springer, vol. 7(1), pages 1-10, December.
    2. Zaher Abdel Fattah Al-Slehat, 2020. "Impact of Financial Leverage, Size and Assets Structure on Firm Value: Evidence from Industrial Sector, Jordan," International Business Research, Canadian Center of Science and Education, vol. 13(1), pages 109-120, January.

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    Keywords

    Industrial Organization;

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