Analyzing the Moderating Role of Liquidity in the Relationship Between Financial Leverage, Firm Size, and Profitability
Keywords:
Profitability, Company size, Financial leverage, LiquidityAbstract
Objective: The study aims to examine the moderating role of liquidity in the relationship between financial leverage, firm size, and profitability among firms listed on the Tehran Stock Exchange.
Methodology: This fundamental and correlational study included 550 listed firms from 2018 to 2024, of which 150 were selected through systematic elimination. Data were analyzed using panel regression with EViews 13. Model selection was conducted via Chow, Hausman, and Lagrange multiplier tests to ensure robustness.
Findings: The results indicated that financial leverage had a significant negative effect on profitability, while firm size showed a significant positive effect. Liquidity also exhibited a significant positive effect on profitability. However, liquidity did not moderate the relationship between firm size and profitability, though it amplified the negative effect of leverage on profitability when included as an interaction term.
Conclusion: Firm size and capital structure are the primary determinants of profitability, while liquidity plays only a limited moderating role. These findings highlight the importance of operational efficiency and strategic resource management, suggesting that high liquidity alone does not guarantee sustainable profitability.
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Copyright (c) 2025 Mohsen Hashemi-Gohar, Sareh Mohebali, Masoud Bazrafkan (Author)
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