Arab Journal of Administration المجلة العربية للإدارة


This research aims to investigate whether leverage is one of the factors explaining accounting return (ROE & ROA) and market return behavior in the Jordanian market. The empirical tests are applied to firms listed in the Amman Stock Exchange (ASE) belonging to the industrial sector, with data extending from 2000 to 2008. Despite that the operating (related to the assets’ structure) and the financial (related to the capital structure) leverage, have been discussed and analyzed for decades, but there is substantial disparity in how they are defined and measured by academics and practitioners. Two different measures of leverage have been used here to specify the effect of each one on return. The results show no relationship between the financial and operating leverage measured in different ways, and there is a difference in regression results when different measurements for operating and financial leverage were used. The best results have been achieved when leverage measured using financial ratios. On the other hand, the results show that market return is not affected by both financial and operating leverage.