Capital structure, tax effect, financial crisis and default risk: Evidence from emerging market

Abstract

The central objective of this study is to investigate the effect of capital structure on corporate failure in the emerging market, in particular Jordan, using a panel data analysis sample representative of 180 Jordanian companies during the period 1990 to 2012. This paper also examines the effect of the financial crisis 2008 on Jordanian corporate insolvency. The level of corporate leverage was found to have a positive effect on the probability of default (PD). Firms with lower bankruptcy costs have a lower probability of default (PD). 2017 Inderscience Enterprises Ltd.