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Arab Journal of Administration المجلة العربية للإدارة

Abstract

The objective of this study is to construct a conceptual model that deals with the ownership structure as a moderator factor that may affect the relationship between capital structure and financial performance and investigating it on all banks listed in the Saudi stock market (N=12) for the period 2010-2015. Using the multiple-regression analysis, the study finds that the surveyed banks tend to use equity financing (average debt ratio=23.4%). The results also indicate that there is a positive impact of the capital structure on both return on assets and return on equity used as indicators of the banks’ financial performance. The results also indicate that ownership concentration had a positive impact on return on assets and on return on equity, whereas individual ownership has negatively affected both indices of financial performance. In addition, the moderator role of ownership structure on the relationship between the capital structure and the financial performance of the surveyed banks is evident in the current study. The impact of the capital structure on financial performance has influenced positively and negatively when the ownership structure enters as a moderator in the relationship. Finally, the study recommends that Saudi banks listed in the Saudi financial market need to balance their ownership structure to ensure an appropriate degree of control over the performance of managers and their decisions, especially with regard to levels of debt ratios, which in turn contributes to improve their financial performance levels.

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