Effect of Debt Financing on Firm Performance: A Study on Energy Sector of Saudi Arabia

Anis Ali and Abdul Rahman Shaik
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Anis Ali: College of Business Administration, Prince Sattam Bin Abdulaziz University, Al Kharj, Saudi Arabia
Abdul Rahman Shaik: College of Business Administration, Prince Sattam Bin Abdulaziz University, Al Kharj, Saudi Arabia

International Journal of Energy Economics and Policy, 2022, vol. 12, issue 6, 10-15

Abstract: The current research seeks to investigate the influence of debt financing (as assessed by the debt-equity ratio) on financial performance as evaluated by ROA and ROE. The information was taken from yearly reports issued by Saudi Arabian oil companies between 2012 and 2019. The current ratio (CR) was also incorporated as an interaction variable in the research. The findings indicate that debt financing has a detrimental influence on business financial performance. Furthermore, even after accounting for the interaction variable, the effect remains negative. Moreover, the business size has a negative link with the ROA and ROE.

Keywords: Debt financing; financial performance; energy companies; return on assets; debt-equity; current ratio (search for similar items in EconPapers)
JEL-codes: L25 L71 M40 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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