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The Effect of Capital Structure on Profitability of Basic Materials Saudi Arabia Firms

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Document pages: 17 pages

Abstract: This research investigated the relationship betweencapital structure and profitabilityof eight companies working in the basic material sector in Saudi Arabia during the period2009 to 2018. The statistical techniques used are regression analysis, fixed effectmodel, random effect model, and Hausman test. The dependent variable is the return on equity (ROE).In contrast, independent variablesare a short-term debt to total assets ratio (SDA), long-term debt to total assets ratio(LDA), and total debt to total assets ratio (DA). The results illustrate a negative relationship between short-termdebt to total assets ratio(SDA) and profitability and this complement with studies like Hamid and others (2015) [1] andAbeywardhana (2015) [2], a negative relationship between long-term debt (LDA) and profitability whichcomplement with studieslike El-Sayed Ebaid (2009) [3], and positive relationship between total debt (DA) and profitabilitywhich complement with studies like Abor (2005) [4], Hamid and others (2015).

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