International Journal of

ADVANCED AND APPLIED SCIENCES

EISSN: 2313-3724, Print ISSN: 2313-626X

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 Volume 11, Issue 10 (October 2024), Pages: 131-139

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 Original Research Paper

Capital structure: Its effects on earnings volatility, cash flows, and financial performance in commercial banks

 Author(s): 

 Abdul Razzak Alshehadeh 1, Ghaleb Awad Elrefae 2, Ihab Ali El Qirem 1, Haneen A. Al-Khawaja 3, 4, 5, *, Habes Mohammad Hatamleh 6

 Affiliation(s):

 1Faculty of Business, Al-Zaytoonah University of Jordan, Amman, Jordan
 2College of Business, Al Ain University, Al Ain 112612, UAE
 3Department of Financial Technology and Banking, Faculty of Business, Ajloun National University, Ajloun, Jordan
 4Applied Science Research Center, Applied Science Private University, Amman, Jordan
 5Jadara Research Center, Jadara University, Irbid, Jordan
 6Faculty of Educational Sciences, Jadira University, Irbid, Jordan

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 * Corresponding Author. 

  Corresponding author's ORCID profile: https://orcid.org/0000-0003-4607-9394

 Digital Object Identifier (DOI)

 https://doi.org/10.21833/ijaas.2024.10.015

 Abstract

This study aimed to clarify the effect of capital structure on earnings volatility and cash flows in the commercial banking sector. The research focused on all 15 banks listed on the Amman Stock Exchange, and data were gathered from their financial statements between 2018 and 2022. The study employed multiple regression analysis to assess the data and test hypotheses. Previous studies have shown mixed results, with some finding a positive relationship between capital structure and financial performance, while others presented opposing views. The findings of this study provide statistical evidence that the debt-to-asset ratio (DTA) positively influenced operating cash flows and their volatility, while negatively affecting profits and their volatility. Additionally, the debt-to-equity ratio (DETE) positively impacted operating cash flows, their volatility, and profit volatility. These results suggest that banks should aim for a balanced capital structure to maintain stable profits and cash flows over time. This requires careful consideration of risks, regulatory requirements, market conditions, and the cost of capital. A balanced approach, involving both debt and equity financing, helps banks manage the risks of fluctuating cash flows and profits.

 © 2024 The Authors. Published by IASE.

 This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

 Keywords

 Capital structure, Earnings volatility, Cash flows, Debt-to-asset ratio, Profit stability

 Article history

 Received 1 July 2024, Received in revised form 15 September 2024, Accepted 3 October 2024

 Acknowledgment

No Acknowledgment.

 Compliance with ethical standards

 Conflict of interest: The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

 Citation:

 Alshehadeh AR, Elrefae GA, El Qirem IA, Al-Khawaja HA, and Hatamleh HM (2024). Capital structure: Its effects on earnings volatility, cash flows, and financial performance in commercial banks. International Journal of Advanced and Applied Sciences, 11(10): 131-139

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 Tables

 Table 1 Table 2 Table 3 Table 4 

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