The effect of financial leverage on the financial performance of the transport sector companies listed on the Saudi Stock Exchange (Tadawul), an applied study

Abstract

The study aimed to recognize the effect of financial leverage measured by the ratio of debt to total assets on financial performance as measured by the ratio (return on assets, return on equity, return on share) in the transportation sector companies listed in the Saudi stock market (Tadawul). The study followed the descriptive analytical approach. The financial statements are based on the financial statements and reports that were disclosed by the companies during the period between (2011-2020).

The study found that the application of the financial leverage mechanism in the transport sector companies is low, as well as a weak direct relationship between the rate of financial leverage and the rate of financial performance as measured by the ratio (return on assets, return on equity, return on share). The study found that there is no statistically significant effect between financial leverage and financial performance as measured by the ratio (return on assets, return on equity, and return on share).

The study recommended the necessity for transport companies to study and evaluate the financing structure in order to reach the ideal ratio of financial leverage that achieves a positive impact on financial performance and increasing the levels of financial leverage in the transport sector companies listed in the Saudi stock market in order to maximize the return on shareholders' equity.