Capital structure decisions and environmental, social and governance performance: insights from Jordan

Hamzeh Al Amosh, Saleh F.A. Khatib, Amneh Alkurdi and Ayman Hassan Bazhair

Journal of Financial Reporting and Accounting, 2022, vol. 22, issue 4, 972-989

Abstract: Purpose - This study aims to explore the impact of capital structure (CS), including total debts, short-term debt, long-term debt and total shareholder equity, on environmental, social and governance (ESG) performance in the context of Jordan. Design/methodology/approach - To achieve the study’s objectives, the authors used the content analysis approach and the longitudinal data generated from the annual reports of 51 industrial companies listed on the Amman Stock Exchange for the period 2012–2020. Findings - The findings show that debt financing enhances ESG performance in all dimensions, while financing by equity did not affect ESG. Consequently, Jordanian companies’ managers are trying to reduce agency costs by investing in ESG activities. In addition, companies are focusing on debt financing instead of equity to achieve their financial as well as nonfinancial goals. This is because the opportunism of new shareholders will likely lead to a focus on maximizing their value at the expense of the broader group of stakeholders, and this will adversely affect companies’ ESG performance. Therefore, debt financing limits shareholder control. Originality/value - To the best of the authors’ knowledge, this is the first examination of the impact of CS financing choices on ESG performance. Thus, this study has important implications for the decisions of executives, policymakers, shareholders and lenders, as it enables them to better understand the linkage between CS and ESG.

Keywords: Capital structure; Debts; Shareholder equity; ESG performance; Emerging market (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrapp:jfra-12-2021-0453

DOI: 10.1108/JFRA-12-2021-0453

Access Statistics for this article

Journal of Financial Reporting and Accounting is currently edited by Prof. Aziz Jaafar and Prof Khaled Hussainey

More articles in Journal of Financial Reporting and Accounting from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().