The Effect of Financial Development on the performance of Non- Financial Firms in the Iranian Securities and Exchange Organization

Document Type : Research Paper

Authors

Assistant Professor in Islamic Banking Department, Allameh Tabatabai University

Abstract

The current study examines the relationship between financial development and capital structure of non-financial firms in the Iranian Securities and Exchange Organization on the basis of unbalanced panel data. In order to do this, Feasible Generalized Least Squares method and data of 200 non-financial firms in the period from 1999 to 2012 have been used. The results show that stock market development has a positive and significant effect on the debt ratio of non-financial firms in Iran, and the impact of stock market activity index is greater than the effect of size index. Surprisingly, the effect of banking sector development on firm's debt ratio is found negative and significant. Also, in this case, the impact of stock market activity index is greater than the effect of size index. Furthermore, the results show that the examined variables related to firm's specifications including profitability, liquidity, non-debt tax shield, size, asset structure and growth opportunity are significant determinants of the non-financial firm's capital structure.

Keywords

References

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The Journal of Economic Policy
Volume 8, Issue 15
June 2016
Pages 25-54

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