Purpose

This study investigates the capital structure behavior of nonfinancial firms in Jordan and Palestine, with a focus on the validity of the trade-off theory under institutional fragility, particularly the role of political instability in shaping financing decisions.

Design/methodology/approach

Drawing on an unbalanced panel of 166 non-financial firms (1,609 firm-year observations) from 2011 to 2021, the study examines the effects of firm-level factors (size, profitability, tangibility, growth, liquidity and non-debt tax shields) and country-level factors (GDP growth, inflation and political instability) on leverage. Both static and dynamic panel estimations are employed, including fixed effects and system GMM models, alongside robustness checks using two-stage least squares (2SLS) and sub-period analysis.

Findings

The results support the trade-off theory, showing that …

Title

Management & Sustainability: An Arab Review

Publisher

Emerald

Publisher Country

United Kingdom

Indexing

Scopus

Impact Factor

4.3

Publication Type

Both (Printed and Online)

Volume

--

Year

2025

Pages

1-22