Information Ratings and Capital Structure: Evidence from Iran

This study aimed to review the relation between information rating and Capital structure of the listed companies in Tehran Stock Exchange during the period of 2005-2014. Moreover, the pooled-panel regression analysis of EViews was used to test the study hypotheses in 160 companies. The independent v...

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Bibliographic Details
Published in:Journal of economic & management perspectives 2017-12, Vol.11 (4), p.1417-1430
Main Authors: Azghandi, Mohammadreza Mohseni, Saeedi, Ali, Masoudian, Maryam Sadat
Format: Article
Language:English
Subjects:
Accounting
Adverse selection
Asymmetry
Capital structure
Debt financing
Equity
Financial leverage
Financial statements
Investments
Stock exchanges
Stockholders
Studies
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Summary:This study aimed to review the relation between information rating and Capital structure of the listed companies in Tehran Stock Exchange during the period of 2005-2014. Moreover, the pooled-panel regression analysis of EViews was used to test the study hypotheses in 160 companies. The independent variables used in this study include financial needs (Financial Deficit) to examine the pecking order model and information rating, both in general and standardized modes. The dependent variable is the capital structure calculated by the debt financing (net debt issuance) and financial leverage. The moderating variable is the relation between the financial needs and debt financing based on the pecking order theory with regard to the information asymmetry and information rating in general and standardized modes. The findings indicated that the effect of the company's financial needs (FD) on the debt financing (net debt issuance) is significant. In other words, the net debt issuance was remarkably high in companies with a higher level of financial needs. However, the information rating (information transparency) of the companies did not affect the financial leverage. The relation between the financial deficit and debt financing (net debt issuance) of the listed companies, regardless of information asymmetry in terms of information rating (information transparency), is considered as an inverse criterion for evaluating information asymmetry. Moreover, the financial slack, company size and profitability variables had a significantly positive effect on financial leverage.
ISSN:2523-5338
2523-5338