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Analysis of the Relationships between Financing and Value of Companies in Tehran Stock Exchange

Mahdi Hajian (), Fatemeh Oghbaee () and Fatemeh Sepehri ()

International Journal of Academic Research in Accounting, Finance and Management Sciences, 2017, vol. 7, issue 3, 24-37

Abstract: One of the duties in trading department is to improve the efficiency of the property structure, the debts and salary of the stockholders in order to maximize their wealth. Managers of trading department carry out this duty by making right decisions in respect to investment, financing and the profit sharing. On the other hand, the investment decisions and financing are connected to financial and operational risks. Therefore, managers should proceed the way that they can both maximize the value of the company and avoid the adverse results of taking risks. To investigate the effect of investing decisions and financing of managers on the value of the company, the information of 75 companies have been gathered during the time span of five years (1386 to 1391). To analyze the information, Spearman correlation coefficient and regression statistical method of panel data (4) are used to determine the relations between the variables. The findings are indicative of the fact that there is statistical significance and the inverse relationship between financial leverage and the ratio of book value to market capitalization. In other words, increase in financial leverage raise the value of the company. In addition, there is no statistical significance and inverse relationship between book value and market capitalization and financial decisions of managers cannot influence the value of company.

Keywords: Operational risk; financial risk; ratio of book value to stock market capitalization (search for similar items in EconPapers)
Date: 2017
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