An Investigation of Determinants of Capital Structure of Affiliated and Unaffiliated firms in Tehran Stock Exchange

اقتصاد پولی مالی

Article 9, Volume 21, Issue 7, January 2015, Pages 210-233   

Document Type: پژوهشی

DOI: 10.22067/pm.v21i7.43022

Authors

Abdorreza Asadi^* ; Mohammadreza Abbaszadeh

Abstract

This paper investigates the effect of firms’ characteristics on leverage ratios
of affiliated and unaffiliated firms in Tehran Stock Exchange (TSE). In this
regard, financial data have been collected from 200 non-financial listed
companies over the five-year period. A regression model with dummy
variable and t-statistic has been used to test the six hypotheses.
The results show a significant negative effect of profitability on leverage
ratios. The effect of growth opportunity on leverage ratios is significantly
positive and tangibility has a significant negative effect on short-term debt
and total debt ratios but for long-term the effect of debt ratio is positive. The
effect of firm size on leverage ratios is insignificant. Out findings also
indicate that the government ownership has a significant effect on the
relationship between firms’ characteristics and capital structure and the
pecking order theory is strongly supported as a pertinent theory to the capital
structure of Iranian companies.

Keywords

Capital structure; Leverage ratios; profitability; Tangibility; Growth opportunity; Government ownership

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