IDEAS home Printed from https://ideas.repec.org/a/spr/futbus/v11y2025i1d10.1186_s43093-025-00637-0.html
   My bibliography  Save this article

The cost of equity capital and investment sensitivity to the cash flows: evidence from Jordanian industrial companies

Author

Listed:
  • Marah Bani Ismail

    (Yarmouk University)

  • Bader Ismaeel

    (Zarqa University)

Abstract

This study aimed to examine the impact of the cost of equity on the sensitivity of investment to cash flows by utilizing cross-sectional time series data (Panel Data). The sample consisted of 25 industrial companies listed on the Amman Stock Exchange (ASE) from 2010 to 2020, encompassing a total of 273 observations for these companies. To assess the sensitivity of investment to cash flows, the study relied on the dynamic neoclassical model. The capital asset pricing model (CAPM) was used to measure the cost of equity. Based on the multiple linear regression analysis, the study reached several key findings. Notably, it found that the cost of equity does not have a statistically significant effect on the sensitivity of investment to cash flows in Jordanian industrial companies. At the same time, there is a statistically significant impact of the cash flows on the investments of Jordanian industrial companies. However, the results indicated a statistically significant effect of cash flow on the investments of these companies. Additionally, the study examined other explanatory variables, including company size and profit distribution percentage. It found no statistically significant effect of the company’s size on the investments of industrial companies. In contrast, profit distribution percentage was found to have a negative, statistically significant impact on the investments of Jordanian industrial companies. These findings highlight the importance of internal financing during restricted markets. Therefore, the study suggests that it is preferable to develop internal financing schemes and increase the openness of capital markets to alleviate financial constraints and stimulate industrial investment in Jordan.

Suggested Citation

  • Marah Bani Ismail & Bader Ismaeel, 2025. "The cost of equity capital and investment sensitivity to the cash flows: evidence from Jordanian industrial companies," Future Business Journal, Springer, vol. 11(1), pages 1-15, December.
    • Handle: RePEc:spr:futbus:v:11:y:2025:i:1:d:10.1186_s43093-025-00637-0
    DOI: 10.1186/s43093-025-00637-0
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1186/s43093-025-00637-0
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1186/s43093-025-00637-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:futbus:v:11:y:2025:i:1:d:10.1186_s43093-025-00637-0. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.