DEBT FINANCING STRATEGIES AND CAPITAL STRUCTURE OPTIMIZATION IN SAUDI ARABIAN CORPORATIONS

Abstract

Saudi Arabian corporations are financing an unusually rapid phase of expansion,diversification, privatization, and infrastructure development while operating within a financial system shaped by concentrated ownership, Islamic financing principles, developing debt markets, and changing governance expectations. This review synthesizes recent evidence on debt financing strategies and capital structure optimization in Saudi corporations and evaluates whether conventional capital structure theories remain adequate in this institutional setting. A structured integrative review was designed around peer-reviewed studies identified through Scopus-oriented publisher platforms and major academic databases, emphasizing research published from 2020 to 2025 while retaining a small number of earlier studies with direct theoretical or Saudi-specific relevance. The synthesis is organized around leverage determinants, debt maturity, Islamic financing and Sukuk, governance and ownership, uncertainty and financing constraints, and the performance consequences of debt. Evidence consistently shows that profitability is associated with lower leverage, whereas firm size, tangibility, growth opportunities, market access, and governance conditions influence both debt capacity and adjustment toward target leverage. However, optimal financing in Saudi Arabia cannot be reduced to a single debt ratio. Sharia compliance, ownership concentration, geographic location, debt-market depth, borrowing costs, and firm-specific distress risk alter both the feasible financing set and the speed of adjustment.