Capital structure and profitability in a tax-free country: evidence from the UAE

Tebourbi, Imen and Irene, Wei Kiong Ting and Qian, Long Kweh and Al Huseini, Harith Ali Hamood (2020) Capital structure and profitability in a tax-free country: evidence from the UAE. Afro-Asian Journal of Finance and Accounting, 10 (3). pp. 430-444. ISSN 1751-6455. (Published)

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The balance between debt and equity is a key factor explaining profitability. This study examines how capital structure affects the profitability of firms listed on stock exchanges in the United Arab Emirates (UAE), a country that does not have a federal corporate income tax regime. The proxies of capital structure used include total, short-term, and long-term debt ratios, while those of profitability are return on assets and return on equity. Over a 2001-2016 sample period, this study documents a significantly negative association between capital structure and profitability. This study finds that the negative association is mainly found in companies with a high level of debts. The results of this study not only imply that information asymmetry exists, they also highlight how capital structure and profitability are associated in the context of a corporate tax-free country.

Item Type: Article
Uncontrolled Keywords: capital structure; profitability; debt; information asymmetry; United Arab Emirates.
Subjects: H Social Sciences > HF Commerce
Faculty/Division: Faculty of Industrial Management
Depositing User: Noorul Farina Arifin
Date Deposited: 04 Jan 2021 07:14
Last Modified: 25 May 2022 02:47
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