Size-Threshold Effect in the Capital Structure–Firm Performance Nexus in the MENA Region: A Dynamic Panel Threshold Regression Model

This paper investigates the nonlinear relationship between capital structure and firm performance in MENA region using a sample of 499 listed firms over 2007–2020 period, or 6986 firm-year observations. Specifically, we examine size-threshold effect structure–firm nexus. To do so, this study applies dynamic panel threshold regression model (DPTR). The findings show that there is debt (Tobin’s Q, ROA, ROE). values size for three models are estimated at 9.126 (about $1 million), 15.48 $5 16.816 $20 respectively, low- high-sized regimes. In lower regime, firm’s value (Q) increases when increases; however, higher decreases increases. Furthermore, performances (ROA ROE) small decrease upper increases, large increase. results several robustness tests. These support predictions signal, pecking order, trade-off theories. Managers (small) should increase (decrease) use to improve performance.