Investigating the effect of company reputation on the cost of capital of companies listed on the Tehran Stock Exchange

Subject Areas : Journal of Capital Market Analysis

bagher mokhtari ¹ , ali jafari ²

1 - Master student of Accounting Department, Islamic Azad University, Bonab Branch, Bonab, Iran
2 - Assistant Professor of Accounting, Islamic Azad University, Bonab Branch, Bonab, Iran

Received: 2021-12-04 Accepted : 2022-01-12 Published : 2021-11-22

Keywords: Tehran Stock Exchange, Company reputation, equity capital cost,

Abstract :

Economic theories predict that reputation plays an important role in determining behavior, and that reputation also influences the actions of corporate professionals, including financial auditors and analysts, and stock financing. This means that more famous companies have lower capital costs because high reputation indicates better company quality, proper transfer of competencies and doing business in accordance with the interests of shareholders. Therefore, the purpose of this study is to investigate the effect of company reputation on the cost of capital in companies listed on the Tehran Stock Exchange. The statistical population of this research is formed by companies listed on the Tehran Stock Exchange and a sample of 114 companies active in various industries was selected by screening method (systematic elimination) during the period between 2014 and 2019. To test the research hypotheses, multiple regression method was used using Eviews software version 9. Findings showed that company reputation has a significant and inverse negative relationship with capital expenditure. This means that the lower the company's reputation, the greater the company's need for financing to borrow and finance equity.