Determinants of Financial Fragility in Jordanian Non-Financial Firms: Empirical Evidence Based on the Financial Instability Hypothesis

Firas Naim Dahmash, Al-Anood Khaled Melhem, Ibrahim N. Khatatbeh () and Abdallah Bader AlZoubi
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Firas Naim Dahmash: Department of Accounting, Business School, The Hashemite University, Zarqa 13133, Jordan
Al-Anood Khaled Melhem: Department of Accounting, Business School, The Hashemite University, Zarqa 13133, Jordan
Ibrahim N. Khatatbeh: Department of Banking and Financial Sciences, Business School, The Hashemite University, Zarqa 13133, Jordan
Abdallah Bader AlZoubi: Department of Accounting, Business School, The Hashemite University, Zarqa 13133, Jordan

IJFS, 2025, vol. 13, issue 4, 1-17

Abstract: Financial fragility among non-financial corporations (NFCs) has become a critical concern in developing economies, where both firm-specific and macroeconomic conditions shape corporate financial stability. Understanding these dynamics is essential to enhancing corporate resilience and informing effective regulatory interventions. This study is motivated by Minsky’s Financial Instability Hypothesis (FIH), to empirically investigate the determinants of financial fragility in Jordanian non-financial firms (NFCs) using panel data from 71 companies listed on the Amman Stock Exchange (ASE) between 2015 and 2021. By employing a panel logistic regression analysis, results reveal that Return on Assets (ROA) significantly supports financial stability, while inflation negatively impacts it, underlining the detrimental impact of increasing inflation rates on corporate financial health. The beneficial effects of GDP growth and institutional quality also emphasize how important governance and economic conditions are in promoting financial stability. The study offers an original insight on the dynamics of financial fragility in a developing market, with important ramifications for regulators, business managers, and policymakers looking to boost institutional quality, control inflation, and increase corporate profitability. The findings extend Minsky’s hypothesis to a developing-market context and provide implications for policymakers seeking to strengthen institutional frameworks, contain inflationary pressures, and promote corporate financial stability.

Keywords: financial fragility; financial instability hypothesis; Hyman Minsky; non-financial firms; Jordan (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2025
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