Capital Structure Resilience During the COVID-19 Pandemic: An Analysis of the Impact of Financial Characteristics on Egyptian Listed Companies

Capital structure decisions are among the most critical financial choices for firms, as they directly influence them. There is an ongoing debate among researchers regarding the optimal capital structure, motivating this study to examine the impact of various factors on firms’ capital structure, while also considering the COVID-19 pandemic as an influential external factor. This study investigates the financial behavior of 147 non-financial firms listed on the Egyptian Stock Exchange over the period of 2011–2022, using firm year observations. Firms were classified into 14 sectors, excluding banking and non-banking financial services, due to their unique regulatory environments. Data were collected from multiple reliable sources, including financial statements, corporate reports, and EGX databases. Advanced econometric techniques, including the Panel Generalized Method of Moments (GMM), the Arellano–Bond test, and Johansen cointegration analysis, were employed to address endogeneity and explore long-run relationships. The results show that leverage is persistent over time, is positively associated with firm size, tangible assets, and growth opportunities, and is negatively related to profitability, cash flow, and liquidity. The COVID-19 pandemic had a small but significant positive effect, and sectoral differences were also observed. The findings provide robust insights into corporate financing behavior in emerging markets, highlighting the interplay between firm characteristics, external shocks, and financing decisions.