The effect of cash flow classes on the speed of adjustment of capital structure

Subject Areas : Journal of Investment Knowledge

atefeh Ghaemian ¹ , bahram Mohseni Maleki rastaghi ² , iman dadashi ³ , Maryam shafiee kakhki ⁴

1 - Ph.D. Student, Department of Accounting, Babol Branch, Islamic Azad University, Babol, Iran.
2 - Assistant Professor, Department of Accounting, Faculty of Economic and Administrative Sciences, university of mazandaran Babolsar, Iran.
3 - Assistant Professor of Accounting University of Qom, Qom, Iran
4 - Assistan Proffesor of Economics, Babol branch, Islamic Azad University, Babol, Iran

Received: 2022-01-22 Accepted : 2022-05-15 Published : 2024-06-21

Keywords: optimal leverage, adjustment speed, Capital Structure, Cash Flow Statement,

Abstract :

The capital structure influences various management decisions such as cash maintenance. The capital structure of companies does not necessarily correspond to the structure of the goal. Companies adjust the capital structure by considering adjustment and deviation costs. The role of liquidity in the dynamic nature of capital structure, especially the speed with which companies adjust their capital structure to the goal, is examined. It seems that a company with higher liquidity will face lower costs associated with issuing new securities and is therefore more inclined to quickly correct any deviations from its optimal leverage ratio from its target ratio. To verify this claim, In this study, 106 companies listed on the Tehran Stock Exchange between 1384-1398 were examined. Through rolling regression, the effect of each heading of cash flow statement on the adjustment speed in upper and lower lever companies was tested. The results show that the speed of reaching the optimal leverage in companies with low optimal leverage is higher than companies with high optimal leverage. This indicates a lack of attention to future debt capacity in companies listed on the Tehran Stock Exchange. The results also show that the only cash flow from operations is a moderating factor in the speed of adjustment of the optimal leverage for companies above the optimal leverage.

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