Relationship between Jordan’s corruption level and company capital structure

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Recently, corruption has become widespread, and firms' responses to corruption carry significant implications. The aim of this study is to check how corruption levels in Jordan influence the capital structure of 80 non-financial companies listed on the Amman Stock Exchange (ASE) from 2013 to 2022. Capital structure is the main dependent variable, and corruption is the crucial variable analyzed as the independent factor. Control variables include company age, profitability, asset tangibility, company size, and the Gross Domestic Product (GDP), in addition to the inflation rate, to create a solid framework for analyzing this nexus. This quantitative research paper applies the fixed-effect (FE) estimation to examine the static model of the study and the generalized method of moment (GMM) for the dynamic model via panel data investigation encompassing 800 company-year observations. The R2 results explain 42.1% of the variations in capital structure level. Accordingly, a 1% upsurge in corruption is accompanied by a 0.0367-unit upsurge in the capital structure ratio. This response is interpreted through the lens of the shielding theory, suggesting that firms raise debt to protect themselves against the predations of corrupt officials. The analysis reveals meaningful connections between the control variables and the capital structure. Specifically, increases in tangibility, firm size, inflation, and GDP correspond to a 3.56%, 1.07%, 6.06%, and 2.143% increase in capital structure, respectively, indicating a positive influence. Conversely, the firm age and profitability variables show adverse effects on capital structure, with coefficients of –1.46% and –7.3%, respectively.

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    • Table 1. Variable definitions
    • Table 2. Descriptive statistics
    • Table 3. Correlation analysis
    • Table 4. Influence of corruption level on corporate capital structure: A fixed-effects analysis
    • Table 5. Effect of corruption level on capital structure: A GMM analysis
    • Table 6. Effect of corruption level on market capital structure: A random-effect analysis
    • Conceptualization
      Marwan Mansour, Mo’taz Al Zobi, Mohammad Altawalbeh, Dheif Allah E’leimat, Ibrahim Alnohoud
    • Data curation
      Marwan Mansour, Mohammad Altawalbeh, Dheif Allah E’leimat, Ahmad Marei
    • Formal Analysis
      Marwan Mansour, Mohammad Altawalbeh
    • Funding acquisition
      Marwan Mansour, Mohammad Altawalbeh, Dheif Allah E’leimat, Ibrahim Alnohoud, Ahmad Marei
    • Investigation
      Marwan Mansour, Mo’taz Al Zobi, Dheif Allah E’leimat, Ahmad Marei
    • Methodology
      Marwan Mansour, Ahmad Marei
    • Project administration
      Marwan Mansour, Mohammad Altawalbeh, Ibrahim Alnohoud, Ahmad Marei
    • Resources
      Marwan Mansour, Mohammad Altawalbeh, Ahmad Marei
    • Software
      Marwan Mansour, Mohammad Altawalbeh, Dheif Allah E’leimat, Ahmad Marei
    • Supervision
      Marwan Mansour, Ahmad Marei
    • Validation
      Marwan Mansour, Ibrahim Alnohoud, Ahmad Marei
    • Visualization
      Marwan Mansour, Mo’taz Al Zobi, Dheif Allah E’leimat, Ahmad Marei
    • Writing – original draft
      Marwan Mansour
    • Writing – review & editing
      Mo’taz Al Zobi, Mohammad Altawalbeh, Dheif Allah E’leimat, Ibrahim Alnohoud, Ahmad Marei