Impact of Capital Structure Based on the Golden Ratio on Financial Sustainability

Abstract

This analytical study aims to analyze and measure the impact of a capital structure based on the golden ratio on financial sustainability. A sample of ten industrial companies listed on the Iraq Stock Exchange was selected, covering a time period from 2010 to 2023. To test the study hypotheses, a range of statistical methods were employed, including multiple regression analysis and the T-test, utilizing approved statistical data analysis software, particularly E-Views. The study concluded that, the most notable being that designing a capital structure according to the golden ratio provides companies with greater financial flexibility. This approach helps avoid excessive reliance on internal funding sources alone and reduces rigidity in debt ratios. Such a strategy contributes to enhancing the companies' capacity to optimally exploit available investment opportunities, positively reflecting on maximizing long-term returns while ensuring adequate liquidity levels, thereby supporting financial sustainability. Based on the above, the study recommends that the targeted industrial companies in the sample adopt an approach that considers the golden ratio when designing their capital structure, particularly when determining debt and retention ratios. These ratios should align with the ideal range of the golden ratio.