The role of market volatility and leverage in financial performance sustainability: Evidence from Tadawul

Type of the article: Research ArticleAbstractThis study examines the impact of market volatility on the financial performance sustainability in the banking sector and other sectors of the Saudi stock market (Tadawul). Given Saudi Arabia’s ongoing economic transformation under Vision 2030, financial stability remains a key priority, striving to sustain financial performance in the stock market sectors. Using panel data from various sectors of Saudi stock companies during 2019–2023, the study analyzes the effects of general market volatility and sector-specific volatility on financial performance indicators, such as ROE and net income volatility. A panel data regression approach, incorporating both fixed and random effects models, is employed to assess the relationships between volatility and financial performance. The results indicate that financial performance sustainability functions as a separate element because market volatility does not impact financial stability. Banks maintain their financial performance through their internal financial systems, which they use together with their debt management practices to navigate times of market instability. Financial leverage is a key factor that determines how financial performance is affected by financial volatility. Firms with high debt levels show high volatility in profits, indicating its importance in protecting against financial risks. The study reveals that firms should be effective in financial management systems and corporate governance to attain successful financial sustainability in their diversification of income streams. Additionally, policymakers and investors should optimize financial structures, as this approach strengthens market stability and supports Saudi Arabia in achieving its economic objectives.AcknowledgmentThe author extends appreciation to the Deanship of Postgraduate Studies and Scientific Research at Majmaah University for funding this research work through the project number (R-2026-49).