Dynamic or constant approach for capital structure(Case study in Tehran Stock Exchange)
Journal Title: International Research Journal of Applied and Basic Sciences - Year 2013, Vol 4, Issue 8
Abstract
Our findings indicate that the estimations from the OLS, fixed effect and random effect for dynamic adjustment models. In all three models, the significant variable is shown the size, and profitability, a negative relationship with the leverage ratio. The variables of PROF and TANG are also not statistically significant. We can conclude that the estimations of the OLS model are a little bit different from those of the fixed and random ones. The variable of size is negatively related to the leverage ratio for all models and displayed statistically significant in the fixed effect model. The relationship between variable of growth and debt ratio is positive in all estimated models, but statistically insignificant. Tangible assets are associated positively with the leverage ratio. That offered as collateral to credit institutions, reducing the cost of asymmetric information and bankruptcy costs. Also the variable of profitability is positively related to the debt ratio. Finally, we indicate the interaction between financial costs and ability to dynamically adjust the debt ratio affects the deviation of actual debt ratios from their targets. Our analysis reveal that the average distances of the debt ratio from the target ratio is gradually small for both companies with an above-target (belowtarget) debt ratio. And the rejection of null hypotheses suggests that firms don’t have target leverage ratio.
Authors and Affiliations
Hamid Reza Vakili Fard| Assistant Professor of Accounting Azad University of Ollom Tahghighat, Aliasghar Arabahmadi| P.H.D student of Accounting Azad University of Ollom Tahghighat, Farhad Arabahmadi*| Faculty Member of Accounting University of Shahrood, farhad.arabahmadi@gmail.com
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