Imen, TebourbiIrene, Wei Kiong TingKweh, Qian LongHarith, Ali Hamood Al Huseini2020-07-272020-07-27© 20202020Tebourbi, I., Ting, I.W.K., Kweh, Q.L., & Al Huseini, H.A.H., (2020), Capital structure and profitability in a tax-free country: Evidence from the UAE, Afro-Asian Journal of Finance and Accounting. https://www.inderscienceonline.com/doi/abs/10.1504/AAJFA.2020.10825717516447http://hdl.handle.net/20.500.12519/229https://www.inderscienceonline.com/doi/abs/10.1504/AAJFA.2020.108257This article is not available at CUD collection. The version of scholarly record of this article paper is published in Afro-Asian Journal of Finance and Accounting (2020), available online at: https://www.inderscienceonline.com/doi/abs/10.1504/AAJFA.2020.108257The balance between debt and equity is a key factor explaining profitability. This study examines how capital structure affects the profitability of firms listed on stock exchanges in the United Arab Emirates (UAE), a country that does not have a federal corporate income tax regime. The proxies of capital structure used include total, short-term, and long-term debt ratios, while those of profitability are return on assets and return on equity. Over a 2001-2016 sample period, this study documents a significantly negative association between capital structure and profitability. This study finds that the negative association is mainly found in companies with a high level of debts. The results of this study not only imply that information asymmetry exists, they also highlight how capital structure and profitability are associated in the context of a corporate tax-free country. Copyright © 2020 Inderscience Enterprises Ltd.enPermission to reuse the abstract has been secured from Inderscience Enterprises LimitedCapital StructureDebtInformation asymmetryProfitabilityUnited Arab EmiratesArticleCopyright : © 2020 Inderscience Enterprises Ltd.