Are the firms’ capital structure and performance related? Evidence from GCC economies

Figures & data

Table 1. Summary of capital structure theories prediction on leverage and firm value.

Researcher	Theory	Theoretical prediction
Modigliani and Miller (1958)	MM debt irrelevance theorem	No impact of debt on firm value/performance
Modigliani and Miller (1963)	MM debt relevance theorem	Tax advantage on debt could positively contribute to firm value
Jensen and Meckling (1976)	Agency theory	Debt could minimise the conflict of interest and improve a firm’s efficiency.
Kraus and Litzenberger (1973)	Trade-off theory	Up to optimal level of debt can contribute to the value of the firm positively.
Myers and Majluf (1984)	Pecking-order theory	Debt is a secondary choice for financing after internal financing, assuming the negative impact of debt on firm value under the assumption of information asymmetry.
Baker and Wurgler (2002)	Market timing theory	Choosing debt or equity based on the market situation can enhance the firm value.

Source: Authors’ based on existing literature.

Table 2. Capital structure and firms’ performance, empirical evidence summary.

Studies on developed economies
Studies	Country	Nature of the firms	Findings
Berger and Di Patti (2006)	US	Financial (Banks)	Positive
Jermias (2008)	US	Non-financial	Negative
Margaritis and Psillaki (2010)	France	Non-financial	Positive
Nasimi (2016)	UK	Non-financial	Positive
Li et al. (2019)	European countries	Non-financial	Negative
Abdullah and Tursoy (2021)	Germany	Non-financial	Positive
Studies on developing economies
El-Sayed Ebaid (2009)	Egypt	Non-financial	No or weak
Abor (2007)	Ghana	Non-financial	Negative
Khan (2012)	India	Non-financial	Positive
Salim and Yadav (2012)	Malaysia	Non-financial	Negative
Soumadi and Hayajneh (2012)	Jordan	Non-financial	Negative
Olokoyo (2013)	Nigeria	Non-financial	Positive
Sheikh and Wang (2013)	Pakistan	Non-financial	Negative
Dawar (2014)	India	Non-financial	Negative
Nassar (2016)	Turkey	Non-financial	Negative
Ayaz et al. (2021)	Malaysia	Non-financial	Positive
Danso et al. (2021)	Indian	Non-financial	Negative
Khan (2022)	GCC countries	Financial (banks)	Positive
Das et al. (2022)	Bangladesh	Non-financial	Negative
Ghardallou (2023)	Saudi Arabia	Non-financial	Negative

Source: Authors’ based on existing studies.

Table 3. Sampling procedures.

Description	No. of company years
Total number of listed firms in GCC markets during the study period (2011–2021)	9,168
Less: Banks and insurance firms	2,460
Less: Non-financial firms with missing data in DataStream	3,026
Final Sample available for study analysis	3,682

Source: Authors’ compilation.

Table 4. Study sample distribution.

Panel A: by years and GCC countries
Year	KSA	Kuwait	UAE	Oman	Qatar	Bahrain	Total
2011	107	81	43	28	25	10	294
2012	112	83	44	29	25	10	303
2013	116	83	45	33	25	10	312
2014	118	84	46	36	25	10	319
2015	122	85	47	37	26	10	327
2016	124	85	49	37	26	12	333
2017	133	87	50	38	26	12	346
2018	149	88	51	38	26	12	364
2019	149	88	51	38	26	12	364
2020	149	88	51	38	26	12	364
2021	149	86	49	35	25	12	356
Total	1,428	938	526	387	281	122	3,682

Panel B: By Industry and GCC countries.

Industry	KSA	Kuwait	UAE	Oman	Qatar	Bahrain	Total
Industrials	414	271	204	117	94	11	1,111
Real Estate	128	311	106	0	55	11	611
Consumer Discretionary	258	88	58	21	22	44	491
Consumer Staples	186	51	65	44	22	28	396
Basic Materials	211	44	0	44	11	11	321
Telecommunications	55	53	54	22	22	17	223
Energy	38	66	17	55	22	0	198
Utilities	31	16	11	84	11	0	153
Health Care	83	16	11	0	22	0	132
Technology	24	22	0	0	0	0	46
Total	1,428	938	526	387	281	122	3,682

Source: Authors’ compilation.

Table 5. Definition of variables.

Dependent variables
Return on Asset (ROA)	The ratio of firms’ net income to total assets
Return on Equity (ROE)	The ratio of firms’ net income to total equities
Earnings per Share (EPS)	The ratio of firms’ net income to total shares outstanding
Explanatory variables
Short-term debt (STD)	The proportion of short-term debt to total assets
Long-term debt (LTD)	The proportion of long-term debt to total assets
Total debt (TD)	The proportion of total debt to total assets
Control variables
Assets growth (GRW)	(Total assetst − Total assetst-1)/Total assetst-1
Tangibility (TAN)	Fixed assets/Total assets
Earnings volatility (EVL)	(Operating incomet − Operating incomet-1)/Operating incomet-1
Size	Natural logarithm of total assets
Macroeconomic variables
Annual economic growth (EG)	Annual GDP growth rate
Annual inflation (INF)	Annual inflation rate

Table 6. Descriptive statistics.

Descriptive statistics of the whole sample (N = 3,682)					Descriptive statistics (means) by country (N = 3,682)
Variable	Mean	Median	Min	Max	Bahrain	KSA	Kuwait	Oman	Qatar	UAE
ROA	5.95	5.27	−48.50	39.32	7.44	7.07	3.43	8.17	7.56	4.57
ROE	7.02	7.14	−188.45	95.92	7.73	8.18	3.27	11.03	10.56	5.57
EPS	0.53	0.06	−45.90	42.81	0.04	1.19	0.02	0.04	0.41	0.21
TD	0.23	0.20	0.00	0.96	0.11	0.24	0.23	0.24	0.24	0.21
LTD	0.14	0.08	0.00	0.95	0.06	0.14	0.14	0.16	0.19	0.13
STD	0.09	0.05	0.00	0.71	0.06	0.10	0.09	0.09	0.06	0.08
GRW	0.05	0.02	−0.95	2.70	0.04	0.07	0.02	0.05	0.04	0.04
EVL	−0.01	−0.03	−26.81	39.62	−0.05	−0.10	0.02	0.26	−0.06	0.04
TAN	0.42	0.42	0.00	1.00	0.44	0.48	0.36	0.47	0.38	0.35
SIZ	13.46	13.56	7.67	21.49	11.57	14.68	11.45	11.14	15.39	14.84
EG	2.15	2.51	−8.86	13.38	2.40	2.33	0.91	2.64	3.15	2.92
INF	1.88	2.24	−2.54	5.83	1.26	2.05	2.66	1.12	1.28	1.05

Source: Authors’ calculation; Note: All variables are defined in Table 5.

Table 7. Correlation analysis.

Variables	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)
(1) ROA	1.00
(2) ROE	0.72***	1.00
(3) EPS	0.56***	0.62***	1.00
(4) TD	−0.23***	−0.16***	−0.15***	1.00
(5) LTD	−0.18***	−0.08***	−0.10***	0.82***	1.00
(6) STD	−0.15***	−0.17***	−0.11***	0.53***	−0.05***	1.00
(7) GRW	0.26***	0.36***	0.22***	0.05***	0.07***	−0.01	1.00
(8) EVL	0.03*	0.07***	0.06***	0.00	0.02	−0.03*	0.07***	1.00
(9) TAN	−0.01	−0.03**	0.03*	0.30***	0.40***	−0.06***	0.04***	0.03*	1.00
(10) SIZ	0.13***	0.13***	0.25***	0.26***	0.31***	0.00	0.10***	0.01	0.16***	1.00
(11) EG	0.12***	0.16***	0.09***	−0.05***	−0.05***	0.00	0.09***	0.02	0.01	0.09***	1.00
(12) INF	0.00	0.05***	0.07***	−0.03*	−0.04**	0.01	0.01	−0.01	−0.02	−0.09***	0.37***	1.00

Source: Authors’ calculation; Note: asterisks denote statistical significance level (***p < .01, **p < .05, *p < .1); All variables are defined in Table 5.

Table 8. Results of variance inflation factor (VIF) tests.

	TD	LTD	STD
TD	1.35
LTD		1.64
STD			1.04
GROW	1.06	1.07	1.07
EVOL	1.02	1.02	1.02
TAN	1.20	1.31	1.14
SIZE	3.15	3.28	2.83
EG	6.61	6.61	6.61
INF	2.24	2.24	2.25

Source: Authors’ calculation; Note: asterisks denote statistical significance level (***p < .01, **p < .05, *p < .1); All variables are defined in Table 5.

Table 9. Results of heteroscedasticity and autocorrelation tests.

	TD			LTD			STD
	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS
Heteroscedasticity test Ch^2	150.16***	24.76***	798.78***	102.77***	8.78***	1112.87***	138.46***	8.80***	917.90***
Wooldridge test F	145.847***	48.398***	29.080***	154.770***	49.081***	27.343***	151.272***	51.340***	28.174***

Source: Authors’ calculation; Note: asterisks denote statistical significance level (***p < .01, **p < .05, *p < .1); All variables are defined in Table 5.

Table 10. (TD) Regression results of the influence of capital structure on firms’ performance in GCC countries over the period 2011–2021.

	OLS			Random effects			Fixed effects			FGLS
	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS
TD	−11.06***	−20.70***	−2.20***	−9.65***	−24.55***	−1.81***	−9.94***	−27.84***	−1.92***	−5.50***	−16.40***	−0.45***
	(0.60)	(1.66)	(0.18)	(1.12)	(3.31)	(0.40)	(1.26)	(4.28)	(0.52)	(0.36)	(1.11)	(0.06)
GROW	9.00***	31.10***	1.67***	2.68***	20.73***	1.10***	1.96***	17.86***	0.88***	0.79***	12.89***	0.23***
	(0.86)	(2.32)	(0.20)	(0.56)	(2.16)	(0.18)	(0.59)	(2.15)	(0.16)	(0.16)	(0.73)	(0.03)
EVOL	0.01	0.34**	0.04***	−0.06*	0.19	0.03**	−0.07*	0.16	0.03**	−0.01	0.27***	0.00**
	(0.05)	(0.15)	(0.01)	(0.04)	(0.15)	(0.01)	(0.04)	(0.15)	(0.01)	(0.01)	(0.05)	(0.00)
TAN	0.06	−1.42	−0.00	−1.57*	−4.71**	−0.39**	−2.00*	−8.12***	−0.59**	−0.36	−0.50	−0.05
	(0.40)	(0.95)	(0.10)	(0.89)	(1.92)	(0.19)	(1.09)	(2.90)	(0.27)	(0.27)	(0.71)	(0.04)
SIZE	1.14***	2.44***	0.25***	1.48***	2.57***	0.31***	2.18***	2.97**	0.60***	0.78***	1.92***	0.07***
	(0.08)	(0.19)	(0.02)	(0.28)	(0.50)	(0.06)	(0.57)	(1.44)	(0.17)	(0.07)	(0.15)	(0.01)
EG	−0.17***	−0.04	−0.01	−0.17***	−0.05	−0.02***	−0.18***	−0.06	−0.02***	−0.02*	0.08	−0.00
	(0.06)	(0.14)	(0.01)	(0.03)	(0.10)	(0.00)	(0.03)	(0.10)	(0.00)	(0.01)	(0.05)	(0.00)
INF	−0.07	0.06	0.01	−0.05	0.06	0.00	−0.05	0.04	0.00	−0.01	0.08	−0.00
	(0.08)	(0.18)	(0.02)	(0.04)	(0.13)	(0.01)	(0.04)	(0.13)	(0.01)	(0.02)	(0.07)	(0.00)
_cons	−1.96	−17.50***	−2.46***	−5.30	−16.02***	−2.97***	−16.48**	−20.61	−6.38***	0.69	−11.64***	−0.61***
	(1.21)	(2.86)	(0.28)	(3.50)	(6.07)	(0.75)	(7.44)	(18.74)	(2.25)	(0.92)	(2.11)	(0.13)
Obs.	3682	3682	3682	3682	3682	3682	3682	3682	3682	3682	3682	3682
R^2	0.289	0.268	0.257	0.258	0.247	0.245	0.259	0.242	0.115
Chi2										148.21	128.19	720.99
Year Dummies	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Country Dummies	Yes	Yes	Yes	Yes	Yes	Yes				Yes	Yes	Yes
Sector Dummies	Yes	Yes	Yes	Yes	Yes	Yes				Yes	Yes	Yes

Source: Authors’ calculation; Note: asterisks denote statistical significance level (***p < .01, **p < .05, *p < .1); All variables are defined in Table 5.

Table 11. (LTD) Regression results of the influence of capital structure on firms’ performance in GCC countries over the period 2011–2021.

	OLS			Random effects			Fixed effects			FGLS
	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS
LTD	−10.97***	−16.11***	−2.00***	−7.25***	−15.27***	−1.18***	−7.02***	−14.87***	−1.09**	−2.88***	−9.46***	−0.29***
	(0.75)	(2.06)	(0.19)	(1.24)	(3.72)	(0.38)	(1.33)	(4.48)	(0.44)	(0.37)	(1.29)	(0.06)
GROW	9.22***	31.37***	1.71***	2.79***	20.83***	1.12***	2.19***	18.49***	0.92***	0.54***	12.47***	0.22***
	(0.87)	(2.34)	(0.20)	(0.57)	(2.15)	(0.18)	(0.61)	(2.15)	(0.16)	(0.17)	(0.74)	(0.03)
EVOL	0.03	0.37**	0.05***	−0.06	0.20	0.03**	−0.07*	0.16	0.03**	−0.01	0.27***	0.00**
	(0.05)	(0.16)	(0.01)	(0.04)	(0.16)	(0.01)	(0.04)	(0.16)	(0.01)	(0.01)	(0.05)	(0.00)
TAN	0.43	−1.60	0.03	−2.18**	−6.46***	−0.52***	−2.88***	−11.65***	−0.82***	−0.78***	−1.16*	−0.05
	(0.43)	(1.01)	(0.10)	(0.90)	(1.94)	(0.18)	(1.10)	(2.93)	(0.25)	(0.28)	(0.70)	(0.04)
SIZE	1.10***	2.20***	0.24***	1.18***	1.94***	0.26***	1.54***	0.79	0.45***	0.63***	1.56***	0.06***
	(0.08)	(0.19)	(0.02)	(0.29)	(0.48)	(0.06)	(0.57)	(1.32)	(0.15)	(0.06)	(0.14)	(0.01)
EG	−0.18***	−0.06	−0.01	−0.18***	−0.07	−0.02***	−0.18***	−0.07	−0.02***	−0.02	0.06	−0.00
	(0.06)	(0.14)	(0.01)	(0.03)	(0.11)	(0.00)	(0.03)	(0.11)	(0.00)	(0.01)	(0.05)	(0.00)
INF	−0.06	0.09	0.01	−0.04	0.09	0.01	−0.04	0.06	0.01	−0.01	0.09	−0.00
	(0.08)	(0.19)	(0.02)	(0.04)	(0.14)	(0.01)	(0.04)	(0.14)	(0.01)	(0.02)	(0.07)	(0.00)
_cons	−2.22*	−15.92***	−2.43***	−2.03	−9.57	−2.44***	−8.92	5.70	−4.64**	2.22**	−8.05***	−0.52***
	(1.27)	(2.92)	(0.28)	(3.59)	(5.87)	(0.69)	(7.47)	(17.29)	(1.95)	(0.90)	(2.03)	(0.12)
Obs.	3682	3682	3682	3682	3682	3682	3682	3682	3682	3682	3682	3682
R^2	0.261	0.239	0.233	0.226	0.216	0.318	0.231	0.213	0.100
Chi2										1334.08	1122.04	815.41
Year Dummies	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Country Dummies	Yes	Yes	Yes	Yes	Yes	Yes				Yes	Yes	Yes
Sector Dummies	Yes	Yes	Yes	Yes	Yes	Yes				Yes	Yes	Yes

Source: Authors’ calculation; Note: asterisks denote statistical significance level (***p < 0.01, **p < .05, *p < .1); All variables are defined in Table 5.

Table 12. (STD) Regression results of the influence of capital structure on firms’ performance in GCC countries over the period 2011-2021.

	OLS			Random effects			Fixed effects			FGLS
	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS
STD	−10.84***	−26.81***	−2.42***	−7.86***	−28.32***	−1.89***	−7.54***	−28.16***	−1.88***	−3.67***	−20.77***	−0.41***
	(0.91)	(2.70)	(0.33)	(1.44)	(4.12)	(0.56)	(1.56)	(5.13)	(0.70)	(0.41)	(1.67)	(0.09)
GROW	8.65***	30.34***	1.60***	2.56***	20.16***	1.07***	2.01***	17.82***	0.88***	0.58***	12.10***	0.20***
	(0.85)	(2.31)	(0.20)	(0.56)	(2.11)	(0.17)	(0.60)	(2.11)	(0.16)	(0.16)	(0.73)	(0.03)
EVOL	0.02	0.34**	0.04***	−0.06*	0.18	0.03**	−0.07*	0.15	0.03**	−0.01	0.28***	0.00**
	(0.05)	(0.15)	(0.01)	(0.04)	(0.15)	(0.01)	(0.04)	(0.15)	(0.01)	(0.01)	(0.05)	(0.00)
TAN	−2.10***	−5.68***	−0.44***	−3.70***	−9.85***	−0.78***	−4.28***	−14.33***	−1.02***	−1.37***	−4.06***	−0.12***
	(0.40)	(0.94)	(0.09)	(0.91)	(1.96)	(0.20)	(1.13)	(3.05)	(0.28)	(0.27)	(0.68)	(0.04)
SIZE	0.72***	1.69***	0.17***	0.92***	1.51***	0.23***	1.27**	0.71	0.44***	0.52***	1.34***	0.05***
	(0.08)	(0.18)	(0.02)	(0.29)	(0.45)	(0.06)	(0.58)	(1.30)	(0.16)	(0.06)	(0.13)	(0.01)
EG	−0.18***	−0.04	−0.01	−0.17***	−0.03	−0.01***	−0.17***	−0.04	−0.02***	−0.02*	0.07	−0.00
	(0.06)	(0.14)	(0.01)	(0.03)	(0.11)	(0.00)	(0.03)	(0.11)	(0.00)	(0.01)	(0.05)	(0.00)
INF	−0.07	0.04	0.00	−0.06	0.04	0.00	−0.06	0.01	0.00	−0.00	0.08	−0.00
	(0.08)	(0.18)	(0.02)	(0.04)	(0.14)	(0.01)	(0.04)	(0.14)	(0.01)	(0.02)	(0.07)	(0.00)
_cons	3.19***	−7.70***	−1.43***	1.47	−2.85	−1.94***	−4.87	8.59	−4.34**	3.87***	−3.78*	−0.43***
	(1.20)	(2.76)	(0.25)	(3.61)	(5.60)	(0.67)	(7.61)	(17.12)	(2.05)	(0.87)	(1.95)	(0.11)
Obs.	3682	3682	3682	3682	3682	3682	3682	3682	3682	3682	3682	3682
R^2	0.247	0.253	0.233	0.218	0.233	0.223	0.225	0.224	0.105
Chi2										1437.64	1287.79	734.49
Year Dummies	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes
Country Dummies	Yes	Yes	Yes	Yes	Yes	Yes				Yes	Yes	Yes
Sector Dummies	Yes	Yes	Yes	Yes	Yes	Yes				Yes	Yes	Yes

Source: Authors’ calculation; Note: asterisks denote statistical significance level (***p < .01, **p < .05, *p < .1); All variables are defined in Table 5.

Table 13. Market capitalisation and corporate tax in GCC.

Country Code	Market capitalisation (% of GDP)	Market capitalisation USD	Corporate tax rate
Bahrain	71%	24.61 bill	0%*
Kuwait	100%	105.99 b	15%
Oman	21%	16.8 b	15%
Qatar	114.5%	165.39 b	10%
Saudi Arabia	330.8%	2.43 trillion USD	20%
UAE	84.36%	294.83 bill	0%**

* Only oil exploration companies are charged 46%, **Oil exploration companies are to pay 55% tax, banks 20%, and other sectors 0%. (Data based on World Bank and KPMG report for the year ended-2020).

Table 14. Durbin-Wu–Hausman tests for endogeneity.

	TD			LTD			STD
	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS
Durbin Ch^2	618.25***	608.184***	173.867***	635.96***	626.813***	210.637***	811.314***	727.674***	269.183***
Wu-Hausman F	736.351***	721.989***	180.848***	761.847***	748.642***	221.416***	1031.28***	898.778***	287.812***

Source: Authors’ calculation; Note: asterisks denote statistical significance level (***p < .01, **p < .05, *p < .1); All variables are defined in Table 5.

Table 15. 2SLS Regression results of the influence of capital structure on firms’ performance in GCC countries.

	TD			LTD			STD
	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS
TD	−44.78***	−127.81***	−8.41***
	(6.02)	(14.96)	(1.28)
LTD				−75.03***	−222.44***	−15.00***
				(15.62)	(41.80)	(3.03)
STD							−102.06***	−270.41***	−17.35***
							(16.52)	(36.54)	(3.00)
GROW	2.59***	21.09***	1.16***	3.70***	24.44***	1.42***	1.47	17.68***	0.93***
	(0.77)	(2.80)	(0.21)	(1.11)	(3.79)	(0.27)	(0.92)	(2.91)	(0.22)
EVOL	−0.07	0.14	0.03**	−0.07	0.16	0.03**	−0.10	0.06	0.02
	(0.05)	(0.16)	(0.01)	(0.07)	(0.22)	(0.01)	(0.07)	(0.19)	(0.01)
TAN	6.37***	15.92***	1.00***	12.52***	36.45***	2.42***	−2.94*	−11.82***	−0.80***
	(1.89)	(4.61)	(0.36)	(4.02)	(10.39)	(0.74)	(1.59)	(3.78)	(0.29)
SIZE	4.14***	8.28***	0.69***	5.04***	11.54***	0.89***	2.35***	3.50***	0.36***
	(0.63)	(1.13)	(0.10)	(1.06)	(2.22)	(0.16)	(0.46)	(0.83)	(0.07)
EG	−0.16***	0.00	−0.01	−0.22***	−0.18	−0.02*	−0.07	0.23	0.00
	(0.04)	(0.13)	(0.01)	(0.06)	(0.19)	(0.01)	(0.07)	(0.19)	(0.01)
INF	−0.06	0.02	0.00	0.03	0.27	0.02	−0.18**	−0.29	−0.02
	(0.05)	(0.17)	(0.01)	(0.08)	(0.25)	(0.02)	(0.08)	(0.24)	(0.02)
_cons	−36.29***	−80.74***	−7.25***	−49.43***	−127.22***	−10.21***	−11.90**	−14.96	−2.78***
	(7.69)	(14.26)	(1.24)	(13.30)	(28.21)	(2.08)	(5.96)	(12.13)	(0.91)
Obs.	3682	3682	3682	3682	3682	3682	3682	3682	3682
Chi2	295.84	332.19	168.62	188.04	169.15	147.05	146.87	201.69	118.55
Year Dummies		Included
Country Dummies		Included
Sector Dummies		Included

Source: Authors’ calculation; Note: asterisks denote statistical significance level (***p < .01, **p < .05, *p < .1); All variables are defined in Table 5.

Table 16. (TD) FGLs regression results of the influence of capital structure on firms’ performance in GCC countries (individual country).

	Bahrain			KSA			Kuwait			Oman			Qatar			UAE
	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS
TD	−5.34	−17.41^2	0.00	−7.80^3	−21.50^3	−3.17^3	−4.70^3	−22.01^3	−0.05^3	−6.84^3	−12.24^3	−0.06^3	−3.45^3	4.00	−0.31^3	−3.44^3	−9.05^3	−0.19^2
	(3.51)	(8.00)	(0.07)	(0.68)	(2.03)	(0.29)	(0.63)	(2.13)	(0.01)	(1.04)	(3.23)	(0.01)	(1.00)	(3.09)	(0.10)	(0.99)	(3.41)	(0.08)
GROW	3.89^3	27.16^3	0.17^3	1.34^3	14.00^3	1.38^3	1.02^3	17.15^3	0.04^3	0.19	5.89^3	0.02^3	0.67^1	2.14	0.09^1	0.06	12.62^3	0.26^3
	(1.33)	(4.53)	(0.04)	(0.30)	(1.33)	(0.16)	(0.34)	(1.59)	(0.00)	(0.52)	(2.04)	(0.01)	(0.39)	(1.70)	(0.05)	(0.40)	(1.87)	(0.05)
EVOL	−0.02	0.16	0.00	0.00	0.38^3	0.04^3	−0.00	0.07	0.00^1	−0.04	0.61^3	0.00^3	−0.09^1	0.28	0.01	−0.02	0.17	0.01^2
	(0.08)	(0.26)	(0.00)	(0.02)	(0.10)	(0.01)	(0.02)	(0.08)	(0.00)	(0.03)	(0.17)	(0.00)	(0.05)	(0.19)	(0.00)	(0.03)	(0.13)	(0.00)
TAN	−4.92^2	−11.38^3	−0.04	0.20	−1.91	−0.59^3	0.07	2.72^2	0.00	−1.93^2	−2.27	−0.02^3	1.25	3.56	0.02	−0.51	−2.54	0.01
	(2.20)	(3.64)	(0.03)	(0.54)	(1.42)	(0.20)	(0.46)	(1.31)	(0.00)	(0.82)	(2.39)	(0.01)	(0.78)	(2.34)	(0.09)	(0.70)	(2.00)	(0.05)
SIZE	0.97	2.71^1	−0.01	0.63^3	2.22^3	0.39^3	1.46^3	3.10^3	0.01^3	0.23	0.45	0.01^3	0.08	0.50	0.06^3	0.99^3	1.72^3	0.08^3
	(0.90)	(1.50)	(0.01)	(0.12)	(0.30)	(0.05)	(0.14)	(0.34)	(0.00)	(0.29)	(0.70)	(0.00)	(0.21)	(0.60)	(0.02)	(0.16)	(0.31)	(0.01)
EG	−6.12^3	−6.14^3	−0.01	0.04^2	0.22^3	0.03^3	−0.96^3	1.63^3	0.00^3	−0.65^3	−1.01^3	−0.00^3	0.40^3	0.94^3	−0.00	32.35^3	15.93	−0.15
	(0.72)	(1.75)	(0.01)	(0.02)	(0.07)	(0.01)	(0.15)	(0.56)	(0.00)	(0.05)	(0.18)	(0.00)	(0.05)	(0.14)	(0.00)	(3.60)	(10.79)	(0.28)
INF	25.23^3	26.48^3	0.05	1.58^3	1.82^3	−0.01	7.08^3	−9.69^2	−0.03^3	2.03^3	3.35^3	0.00^3	−0.52^3	−0.75^3	0.02^2	−141.83^3	−69.05	0.69
	(2.95)	(6.88)	(0.06)	(0.12)	(0.40)	(0.06)	(1.07)	(3.90)	(0.01)	(0.15)	(0.46)	(0.00)	(0.08)	(0.29)	(0.01)	(15.77)	(47.39)	(1.25)
_cons	26.01^2	10.94	0.22	−10.10^3	−27.54^3	−3.43^3	−34.93^3	2.90	0.01	7.00^2	2.60	−0.06^3	14.16^3	4.77	0.01	−103.94^3	−59.65^1	−0.31
	(12.35)	(20.51)	(0.19)	(2.04)	(4.81)	(0.73)	(4.16)	(13.96)	(0.03)	(2.81)	(6.85)	(0.02)	(4.27)	(10.74)	(0.42)	(11.28)	(32.84)	(0.86)
Obs.	122	122	122	1428	1428	1428	938	938	938	387	387	387	281	281	281	526	526	526
Chi^2	190.09	116.11	46.35	621.75	476.88	394.73	391.31	472.51	454.86	466.30	237.47	280.39	198.62	141.30	276.01	192.96	243.61	348.14
Year/Sector Dummies	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes

Source: Authors’ calculation; Note: superscripts numbers denote statistical significance level (³p <.01, ²p <.05, ¹p <.1); All variables are defined in Table 5.

Table 17. (LTD) FGLs regression results of the influence of capital structure on firms’ performance in GCC countries (individual country).

	Bahrain			KSA			Kuwait			Oman			Qatar			UAE
	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS
LTD	−4.09	−20.42^1	−0.04	−5.25^3	−17.49^3	−2.37^3	−1.97^3	−11.42^3	−0.03^3	−5.29^3	−5.11	−0.04^3	−3.12^3	3.09	−0.35^3	−0.39	6.11^1	0.04
	(3.87)	(10.86)	(0.09)	(0.81)	(2.44)	(0.35)	(0.57)	(2.50)	(0.01)	(1.26)	(3.55)	(0.01)	(1.00)	(3.35)	(0.10)	(1.08)	(3.48)	(0.08)
GROW	3.92^3	28.17^3	0.17^3	1.03^3	13.83^3	1.25^3	0.79^2	16.23^3	0.04^3	−0.29	5.01^3	0.02^3	0.57	2.17	0.08^1	0.14	12.79^3	0.27^3
	(1.36)	(4.75)	(0.04)	(0.35)	(1.36)	(0.16)	(0.34)	(1.69)	(0.00)	(0.48)	(1.93)	(0.01)	(0.38)	(1.70)	(0.05)	(0.41)	(1.93)	(0.05)
EVOL	−0.03	0.13	0.00	0.01	0.40^3	0.05^3	−0.00	0.11	0.00^2	−0.02	0.66^3	0.00^3	−0.08	0.28	0.01^1	−0.03	0.18	0.01^2
	(0.08)	(0.26)	(0.00)	(0.02)	(0.09)	(0.01)	(0.02)	(0.09)	(0.00)	(0.03)	(0.16)	(0.00)	(0.05)	(0.19)	(0.00)	(0.03)	(0.12)	(0.00)
TAN	−5.71^3	−11.48^3	−0.03	−0.00	−1.55	−0.70^3	−0.46	1.09	−0.00	−1.61^1	−1.44	−0.01^1	1.10	3.62	0.02	−0.48	−3.20^1	−0.02
	(2.16)	(3.53)	(0.03)	(0.57)	(1.40)	(0.20)	(0.45)	(1.37)	(0.00)	(0.88)	(2.52)	(0.01)	(0.79)	(2.35)	(0.09)	(0.68)	(1.78)	(0.04)
SIZE	0.61	2.46^1	0.00	0.47^3	1.86^3	0.32^3	1.22^3	2.11^3	0.01^3	0.01	−0.54	0.01^3	0.09	0.56	0.06^3	0.86^3	1.57^3	0.07^3
	(0.81)	(1.39)	(0.01)	(0.12)	(0.28)	(0.05)	(0.14)	(0.32)	(0.00)	(0.30)	(0.66)	(0.00)	(0.21)	(0.60)	(0.02)	(0.14)	(0.29)	(0.01)
EG	−6.14^3	−5.57^3	−0.01	0.04^2	0.23^3	0.03^3	−0.93^3	1.67^3	0.01^3	−0.72^3	−1.13^3	−0.00^3	0.40^3	0.95^3	0.00	32.09^3	17.83^1	−0.04
	(0.73)	(1.75)	(0.01)	(0.02)	(0.07)	(0.01)	(0.15)	(0.58)	(0.00)	(0.05)	(0.17)	(0.00)	(0.05)	(0.14)	(0.00)	(3.62)	(10.59)	(0.25)
INF	25.36^3	24.04^3	0.05	1.59^3	1.75^3	0.01	6.93^3	−9.85^2	−0.03^3	2.18^3	3.60^3	0.01^3	−0.52^3	−0.76^3	0.02^1	−140.66^3	−77.14^1	0.18
	(2.96)	(6.91)	(0.06)	(0.13)	(0.39)	(0.06)	(1.10)	(4.07)	(0.01)	(0.15)	(0.43)	(0.00)	(0.09)	(0.29)	(0.01)	(15.87)	(46.55)	(1.09)
_cons	31.29^3	11.20	0.13	−8.60^3	−24.35^3	−2.74^3	−32.20^3	12.82	0.05	8.23^3	10.09	−0.05^2	13.82^3	3.65	−0.05	−101.61^3	−65.47^2	−0.56
	(11.26)	(19.91)	(0.16)	(1.99)	(4.63)	(0.73)	(4.20)	(14.41)	(0.03)	(2.99)	(6.61)	(0.02)	(4.26)	(10.77)	(0.42)	(11.25)	(32.08)	(0.76)
Obs.	122	122	122	1428	1428	1428	938	938	938	387	387	387	281	281	281	526	526	526
Chi^2	195.94	109.80	48.30	472.00	413.90	311.95	346.47	324.84	417.19	446.83	240.43	241.66	186.27	142.81	291.23	195.73	254.63	376.31
Year/Sector Dummies	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes

Source: Authors’ calculation; Note: superscripts numbers denote statistical significance level (³p < 0.01, ²p < 0.05, ¹p < 0.1); All variables are defined in Table 5.

Table 18. (STD) FGLs regression results of the influence of capital structure on firms’ performance in GCC countries (individual country).

	Bahrain			KSA			Kuwait			Oman			Qatar			UAE
	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS	ROA	ROE	EPS
STD	−0.95	−5.26	0.06	−4.37^3	−19.83^3	−2.88^3	−2.80^3	−24.17^3	−0.04^3	−5.56^3	−17.65^3	−0.06^3	−0.90	6.41	0.10	−3.04^2	−25.92^3	−0.34^3
	(3.94)	(11.29)	(0.08)	(0.75)	(2.91)	(0.40)	(0.81)	(3.01)	(0.01)	(1.28)	(4.31)	(0.01)	(1.69)	(7.57)	(0.20)	(1.26)	(5.49)	(0.11)
GROW	3.97^3	26.16^3	0.17^3	0.43	11.81^3	1.05^3	0.96^3	17.22^3	0.04^3	0.29	5.44^3	0.02^3	0.39	2.13	0.08	0.24	13.21^3	0.25^3
	(1.40)	(4.72)	(0.04)	(0.28)	(1.30)	(0.15)	(0.34)	(1.68)	(0.00)	(0.50)	(1.96)	(0.01)	(0.38)	(1.69)	(0.05)	(0.43)	(1.86)	(0.05)
EVOL	−0.03	0.10	0.00	0.02	0.46^3	0.05^3	−0.01	0.09	0.00	−0.03	0.66^3	0.00^3	−0.08	0.27	0.01^1	−0.02	0.21^1	0.01^2
	(0.09)	(0.25)	(0.00)	(0.02)	(0.09)	(0.01)	(0.02)	(0.08)	(0.00)	(0.03)	(0.18)	(0.00)	(0.05)	(0.19)	(0.00)	(0.03)	(0.13)	(0.00)
TAN	−6.24^3	−13.36^3	−0.04	−1.18^2	−6.33^3	−1.15^3	−0.49	−1.14	−0.00	−3.26^3	−5.49^2	−0.03^3	0.39	4.23^1	−0.02	−0.79	−2.90	−0.02
	(1.98)	(3.35)	(0.02)	(0.54)	(1.42)	(0.19)	(0.45)	(1.35)	(0.00)	(0.92)	(2.45)	(0.01)	(0.77)	(2.34)	(0.09)	(0.68)	(1.81)	(0.04)
SIZE	0.16	0.92	−0.01	0.30^2	1.19^3	0.23^3	1.12^3	1.91^3	0.01^3	−0.55^2	−0.38	0.01^3	0.19	0.63	0.04^2	0.86^3	1.68^3	0.07^3
	(0.69)	(1.32)	(0.01)	(0.12)	(0.25)	(0.04)	(0.13)	(0.30)	(0.00)	(0.25)	(0.63)	(0.00)	(0.20)	(0.59)	(0.02)	(0.14)	(0.28)	(0.01)
EG	−6.17^3	−5.48^3	−0.01	0.05^3	0.27^3	0.04^3	−1.00^3	0.98*	0.00^3	−0.64^3	−0.97^3	−0.00^3	0.45^3	0.94^3	0.00	33.34^3	20.72^2	−0.05
	(0.72)	(1.80)	(0.01)	(0.02)	(0.07)	(0.01)	(0.16)	(0.57)	(0.00)	(0.05)	(0.18)	(0.00)	(0.05)	(0.14)	(0.01)	(3.70)	(10.13)	(0.27)
INF	25.49^3	23.82^3	0.04	1.68^3	1.80^3	0.02	7.43^3	−4.86	−0.02^2	1.96^3	3.29^3	0.00^3	−0.55^3	−0.72^2	0.01	−146.16^3	−89.97^2	0.24
	(2.91)	(7.09)	(0.06)	(0.12)	(0.39)	(0.06)	(1.14)	(3.95)	(0.01)	(0.15)	(0.44)	(0.00)	(0.08)	(0.29)	(0.01)	(16.24)	(44.52)	(1.18)
_cons	37.34^3	30.92^1	0.23	−6.51^3	−13.49^3	−1.41^3	−32.92^3	−2.38	0.02	14.20^3	11.20^1	−0.03	12.19^3	2.40	0.20	−105.00^3	−74.31^2	−0.48
	(9.44)	(18.53)	(0.17)	(2.08)	(4.38)	(0.71)	(4.34)	(14.11)	(0.03)	(2.60)	(6.25)	(0.02)	(4.04)	(10.55)	(0.42)	(11.49)	(30.92)	(0.82)
Obs.	122	122	122	1428	1428	1428	938	938	938	387	387	387	281	281	281	526	526	526
Chi^2	212.26	106.44	51.06	508.58	426.67	329.03	328.81	425.96	383.95	401.63	258.39	218.66	194.69	141.66	238.96	202.40	292.44	345.95
Year/Sector Dummies	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes	Yes

Source: Authors’ calculation; Note: superscripts numbers denote statistical significance level (³p <.01, ²p <.05, ¹p <.1). All variables are defined in Table 5.

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