Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)

Abstract

The Mediating Effect of Investment Decisions and Financing Decisions on the Influence of Capital Structure Against Corporate Performance: Evidence From Jordanian Listed Commercial Banks

Author(s): Yousef Shahwan

The primary objective of this study is to examine the mediating effects of investment and financing decisions on the impact of capital structure towards the overall performance of the Jordanian listed commercial banks. Therefore, the listed Commercial Banks in Amman Stock Exchange that constantly published their financial statements for 16 years (2002–2017) have been considered as the unit of analysis and their annual financial report was used as a source of data. In this study, descriptive analysis and inferential tools have been employed to examine the relationship between the variables under study. Basically, Structural Equation Modelling (SEM) through AMOS version 25 and SPSS version 21 were affianced to investigate the patterns of relationships between variables under study so as to define the direct and or indirect effects of mediating variables against the endogenous and the exogenous variables. It is proved in the findings of this study that both investment and financing decisions have partially mediate the effect of capital structure on the corporate performance in the Jordanian listed commercial banks, since both direct and indirect regression path (relationships) between the endogenous and exogenous variables were significant and positive at a p-value<0.001 and 0.05 two-tailed. Originally, the contributes of this study include, bridging the gap in the existing knowledge since this study is unique in Jordanian financial sector when considering the combination of the variables used in the study. The study also makes it clear that the Jordanian banks should understand the mediating effects of the investment and financing decisions towards the impact of capital structure on the corporate performance. The findings hinted the importance of selecting appropriate capital mix since it has a key role to play in the determination of firm value.