Some Determinants of Corporate Financing Decisions: Evidence from the Listed Companies in Tehran Stock Exchange

محورهای موضوعی : International Journal of Finance, Accounting and Economics Studies

Younes Badavar Nahandi ¹ , Vahid Taghizadeh Khanqah ²

1 - Department of Accounting, Tabriz branch, Islamic Azad University, Tabriz, Iran
2 - Department of Accounting, Tabriz branch, Islamic Azad University, Tabriz, Iran

تاریخ دریافت : 1390/01/16 تاریخ پذیرش : 1390/05/24 تاریخ انتشار : 1391/03/11

کلید واژه: Capital Structure, Financing Decisions, Pecking Order Theory, Trade-off Theory, Agency Cost Theory,

چکیده مقاله :

The aim of this empirical study is to explore the trade-off model and pecking order model of capital structure. The investigation is performed using panel data procedures for a sample of 76 firms listed in Tehran Stock Exchange during 2007-2010.The study employs OLS regression model in examining the capital structure of firms in Iran. The study employs variables reflecting differing theoretical arguments on capital structure. The results suggest that trade-off model and pecking order model are not mutually exclusive. Both trade-off model and pecking order model play an important role in determining the total debt level of firms. However, empirical results of long-term debt level consistent only with pecking order model but not trade-off model. This may because financial institutions in Iran do not concern seriously on the risk of insolvency. Firms with higher risk can access long- term debt financing as easy as firms with less risk. The findings of the study clearly demonstrate the importance of capital structure decisions for financial sources.

منابع و مأخذ:

• Ahmadpour. A. Salimi. A. (2007).The impact of size and industry on capital structure: The evidence from Iran, Journal of social sciences and humanities of Shiraz University, 26, PP, 13-35.


• Ang, J. &McConnel, J. (1982). The administrative cost of corporate bankruptcy: a note. Journal of Finance, 37, pp. 219-226.


• Alexei. V. Ovtchinnikov (2010). Capital structure decisions: Evidence from deregulated industries, Journal of Financial Economics, 95, pp. 249–274.


• Bagherzadeh, S. (2003). The Determinants of Capital Structure Choice: Iranian Evidence, The Iranian Journal of Financial Research, Vol. 5, No.16, pp. 23-47.


• Barton, S., & Hill, N. (1989).An empirical test of stakeholder theory predictions of capital. Financial Management, 18 (1), pp. 36-44.


• Berryman, J. (1982), Small business uniqueness and the theory of financial management. Journal of Small Business Finance, 25, pp. 43-59.


• Bowen, R., Daley, L., & Huber, C. (1982). Evidence on the existence and determinants of inter industry differences in leverage. Financial Management, 11 (4), pp. 10-20.


• Chen..J. (2003). Determinants of capital structure of Chinese-listed companies, Journal of Business Research, 57, pp. 1341-1351.


• Chittenden, F., Hall, G., & Hutchinson, P. (1996). Small firm growth, access to interest on corporate capital structure. Journal of Finance, 43, pp. 271-281.


• Dammon, R., &Senbet, L. (1988).The effect of taxes and depreciation on corporate investment and financial leverage. Journal of Finance, 43 (3), pp. 3-29.


• Eisenhardt, K.M. (1989). “Agency theory: an assessment and review”, Academy of Management Review, Vol. 14, pp. 57-74.


• Ekanayake, S. (2004). “Agency theory, national culture and management control systems”, The Journal of American Academy of Business Cambridge, Vol. 4 Nos 1/2, pp. 49-54.


• Fama, E., & French, K. (2002). Testing tradeoff and pecking order predictions about dividends and debt. Review of Financial Studies, 15, pp. 1-33.


• Faris M. Mouamer, A. (2011)."The determinants of capital structure of Palestine-listed companies", TheJournal of Risk Finance, Vol. 12 Iss: 3 pp. 226 - 241


• Givoly, D., Hayn, C., Ofer, R., &Sarig, O. (1992). Taxes and capital structure: evidence from firm's response to tax reform act of 1986. The Review of Financial Studies, 5, pp. 331-355.


• Griner, E., & Gordon, L. (1995). Internal cash flow, insider ownership and capital expenditures: a test of pecking order and managerial hypothesis. Journal of Business Finance and Accounting, 22, pp. 179-197.


• [17] Harris, M., &Raviv, A. (1990). Capital structure and the informational role of debt. Journal of Finance, 45 (2), 321-349.


• Hovakimian, A., Opler, T., & Titman, S. (2001).The debt-equity choice. Journal of Financial and Quantitative Analysis, 36, pp. 1-24.


• Ho-Yin Yue, (2011). Determinants of Corporate Capital Structure under Different Debt Maturities, International Research Journal of Finance and Economics ISSN 1450-2887 Issue 66 (2011).


• Jensen, M. (1986). Agency costs of free cash flow, corporate finance and takeovers. American Economic Review, 76, 323-339.


• Jensen, M., &Meckling, W. (1976). Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 2, 305-360.


• Khajavi. SH. A. and S.H. Hosseini, (2010). Capital structure and political patronage in Tehran Stock Exchange, Financial Knowledge of security analysis (Financial Study), 3. Pp. 53-65.


• Keshtkar. R. Valipour. H. Javanmard. Ali. (2012). Determinants of Corporate Capital Structure under Different Debt Maturities: Empirical Evidence from Iran, International Research Journal of Finance and Economics, Issue 90. PP. 1-8.


• Kester, W. (1986). Capital and ownership structure: a comparison of United States and Japanese manufacturing corporations. Financial Management, 15, 5-16.


• Lang, L., &Litzenberger, R. (1989). Dividend announcements: cash flow Signaling vs. free cash flow hypothesis? Journal of Financial Economics, pp. 181-191.


• [26] Lucas, D., & McDonald, R. (1990). Equity issues and stock price dynamics. Journal of Finance, 45, 1019-1043.


• Modigliani, F., & Miller, M. (1963). Corporate income taxes and the cost of capital: a correction. American Economic Review, 53, 443-453.


• Modigliani, F., & Miller, M. H. (1958).The cost of capital, corporation finance, and the theory of investment. American Economic Review, 48, 261-275.


• Myers, S. (1977). Determinants of capital borrowing. Journal of Finance Economics, 5, pp. 5147-5175.


• Myers, S.C. and Majluf, N.S. (1984). "Corporate Financing and Investment Decisions When Firms have Information that Investors Dnot Have", Journal of Financial Economics, Vol. 13, PP.187-221.


• Nadem. M, Nabiei. H, Noroozi. M, Madine. S.H. (2012). Determinants of Capital Structure: Evidence from Iranian Listed Companies, International Research Journal of Finance and Economics, 101, PP. 1-9.


• Ooi, J. (1999). The determinants of capital structure: evidence on UK property companies. Journal of Property Investment and Finance, 17 (5), pp. 464-480.


• Rajan, R., &Zingales, L. (1995). What do we know about capital structure? Some Evidence from international data. Journal of Finance, 50, pp. 1421-1460.


• Rungtusanatham, M., Rabinovich, E., Ashenbaum, B. and Wallin, C. (2007). “Vendor-owned inventory management arrangements in retail: an agency theory perspective”, Journal of Business Logistics, Vol. 28 No. 1, pp. 111-35.


• Shyam-Sunder, L., & Myers, S. (1999).Testing static trade-off against pecking order models of capital structure. Journal of Financial Economics, 51, 219-244.


• Titman, S., &Wessels, R. (1988). The determinants of capital structure choice. Journal of Finance, 43, pp. 1-19.


• Whited, T. (1992). Debt, liquidity constraints, and corporate investment: evidence from panel data. Journal of Finance, 47, pp. 1425-1460.


• Zu, X, Kaynak. H.(2012).An agency theory perspective on supply chain quality management, International Journal of Operations & Production Management, Vol. 32, pp. 423– 446.