The Impact of Leverage on Firms Investment Decision in Tehran Stock Exchange (TSE)

Subject Areas : Management Accounting

اسداله افشاری ¹ , علی سعیدی ² , الهام رشادی ³

1 - ندارد
2 - ندارد
3 - ندارد

Received: 2012-01-15 Accepted : 2012-03-09 Published : 2012-09-10

Keywords: Leverage, investment, Fixed and Random Effects,

Abstract :

The present paper is aimed at analyzing the impact of leverage on firm’sinvestment decision of Tehran Stock Exchange (TSE) listed companies during theperiod from 2005 to 2009. To measure the impact of leverage on firm’s investmentdecision, unbalanced panel regression, with regard to random and fixed effect modelsare used by taking control variable including Tobin’s Q, sales, operating cash flow,Return on Asset, current ratio (liquidity) and retained earnings. Tow criteria forleverage are considered: i) debt ratio (total debt on total asset) ii) long term debt ratio(total long term debt on total asset). In addition, we demarcate between three types offirms (i) Small firms, (ii) Medium firms and (iii) Large firms. The results reveal nosignificant relationship between leverage and investment in any types of firms.