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The Choice between Equity and Debt: Empirical Evidence from the Iranian Companies
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A. Ahmadimousaabad   , F. Mohammadi Nodeh |
| Department of Management, Lahijan Branch, Islamic Azad University, Lahijan, Iran |
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Abstract: (3955 Views) |
| The paper efforts to analyze the determinants and their relationship with the capital structure of the listed companies according to the trade-off (TOT) and pecking order (POT) theories. The investigation has used panel data of five variables from Iranian listed companies for a period of ten years. The data consists of 1230 observations regarding stock market and accounting data covering the period from 2001-2010. The inferences are drawn using trade-off theory and Pecking order theory. OLS and GMM analysis is applied for hypothesis testing to determine the influence of the predictor variable. The variables of tax, profit, size, growth and capital intensity factors are included to represent the potential influence of traditional theories. The study analyzes the impact of the financial factors on the debt and equity structure of the Iranian firms. The results indicate that the size, tax and capital intensity are positively related to the capital structure. In addition, profitability is negatively related to the capital structure. However, growth is insignificant. The results of the firm size, tax and capital intensity are consistent with the trade-off theory and the result of the profitability is consistent with the pecking order theory. |
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| Keywords: Capital Structure, Trade-Off Theory, Pecking Order Theory, Capital Intensity. |
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Full-Text [PDF 409 kb]
(1819 Downloads)
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Type of Study: Research |
Subject:
General
Received: 2017/05/20 | Accepted: 2017/09/25 | Published: 2017/07/19
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