Comparative study of corporate investment, financing decisions and political risk: Evidence from Tehran Stock Exchange

Subject Areas : Journal of Investment Knowledge

Ebrahim Ebrahimi ¹ , nasrin zolfagharkhani ² , Nader Naghshineh ³

1 - Ph.D. candidate, Financial Engineering Faculty, Accounting and Management Department, Islamic Azad University, Eslamshahr Branch, Tehran, Iran
2 - Ph.D. candidate, Financial Engineering Faculty, Accounting and Management Department, Islamic Azad University, Eslamshahr Branch, Tehran, Iran
3 - Assistant Professor, Financial Management Faculty, Accounting and Management Department, Islamic Azad University, Eslamshahr Branch, Tehran, Iran

Received: 2022-12-24 Accepted : 2023-01-10 Published : 2024-03-20

Keywords: Iran's capital market, corporate financing decisions, corporate investment, Political Risk,

Abstract :

Objective: Knowing the financial, economic and political variables is very important for the decisions of financial market activists and investors, and not considering these variables causes disruption in decision making.This research has been written with the aim of how political risk influences corporate financing and investment decisions.Research Methodology: In the present research with practical purpose, the collected information related to 34 companies in the period of 2013-2016 have been analyzed using Eviews 11 software and in order to estimate the model related to Hypotheses, data pooling method and panel data have been used.results:The findings showed that political risks and company-level and country-level factors affect companies' financing decisions. Also, the effect of political risks on financing decisions is different under different financing strategies such as debt and equity financing. Also, political risks and company-level and country-level factors have a negative and significant effect on corporate investment.Originality/scientific added value: The financing of companies decreases due to political risk. Political risks have a negative effect on economic and financial activities. To avoid losses caused by sudden political shocks, companies use less financing in financial decision-making when they face high political risk. As a result, it causes a decrease in corporate investment and the entry of liquidity into the production sector and productive activities.

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