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Investigating the relationship between capital structure and free cash flow and the diversity of companies with the financial performance of companies listed on the Tehran Stock Exchange

Number of pages: 141 File Format: word File Code: 29778
Year: 2014 University Degree: Master's degree Category: Librarianship
Tags/Keywords: capital - Capital structure - diversification - Financial performance - free cash - stock exchange - Tehran Stock Exchange
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  • Summary of Investigating the relationship between capital structure and free cash flow and the diversity of companies with the financial performance of companies listed on the Tehran Stock Exchange

    Accounting Training Group

    Academic Dissertation for Master's Degree

    Abstract

    The capital structure of the company is the permanent financing of the company, which is shown by long-term debts and equity.

    Financing methods for the continuation of activity and the implementation of profitable projects are very effective in the growth process of the company and cause the survival of companies in competitive markets. Financing is done in various short-term and long-term ways, and companies can obtain their financial resources from within the company (for example, from retained earnings) or from outside the company (through the issuance of shares or debt). The main goal of companies is to increase the value of the company and maximize the wealth of the shareholders, and for this purpose, they use methods that help them achieve this goal.

    To test the research hypotheses, the Pearson correlation test was used from Eviews 7 software, and the findings were analyzed and the hypotheses were tested. The Least Squares method (OLS) has been used to test the hypotheses and the results indicate that there is a significant and direct relationship between free cash and the related and unrelated diversity of companies and capital structure with financial performance, and there is a significant relationship between free cash and capital structure, and there is no significant relationship between free cash and capital structure and financial performance with the diversity of all companies. Keywords: capital structure, performance Financial, Sectoral Diversification

    The development of capital markets has increased the pressure on companies for better performance. Company managers are currently facing an era that requires them to establish a new economic framework in their companies, which will better reflect the value and profitability of the business unit. Shareholders, as the owners of the business unit, are seeking to increase their wealth, considering that the increase in wealth is the result of the business unit's desired performance. In the new literature, the concept of management, that is, work with others, has been replaced by others and will increase the complexity of management in the future. Therefore, new paradigms have been revealed in this field. Among these paradigms; The goal of value creation is at the top of management goals. Value-creating management should take advantage of effective management mechanisms and methods on value-creating and use them in practice. Success in value creation depends to a large extent on performance measurement

    Value in economic business is defined by what is created by working with hardware devices and software methods. Business is considered based on value creation; So that the economic activities of business enterprises will not have continuity without thinking and action. Performance measurement is one of the management tasks, which gives an objective meaning to the business. In the management literature, different indicators have been presented to measure performance from different perspectives; which specifies the perspective, goals and objectives of the evaluation. performance evaluation from a comprehensive perspective, that is, a comprehensive look at all dimensions; which in fact reveals the functional signs of the company's management and many of them are necessary. Financial and non-financial dimensions are paid attention to in comprehensive indicators of performance measurement

    With this introduction, in this chapter, the generalities of the research include the description of the research topic and statement of the problem, the necessity and importance of the research, the hypotheses and objectives of the research and the investigated variables, as well as the operational definition of a number of specialized words used in the treatise along with the introduction of the next chapters are introduced.

    1-2- Definition The problem

    The need for organizations to adapt to today's dynamic and complex business environment, to continue surviving, which is caused by the development of competitive markets, on the one hand, and the pressure of investor assemblies on managers to determine the value and explain the precise and transparent measurement criteria, on the other hand, caused companies to review the traditional reward and performance evaluation systems and test them again; whether they were a correct and reliable basis for decision-making or not? Currently, performance measurement techniques are based on economic theories rather than being based on accounting principles.

    Capital is considered one of the most limited economic resources of countries, and for this reason, economists and financial experts are always looking for ways to use it optimally to provide it to the managers of economic units.Therefore, what needs to be reviewed and revised is the validity of the procedures that are used for the optimal allocation of society's resources and savings in efficient and productive activities, and ultimately leads to economic and social growth and gaining people's confidence in the proper use of their capital. There are generally two models for determining the value of a company, one is accounting models and the other is economic models. Failure to use appropriate criteria to evaluate performance, on the one hand, causes the stock price of companies to not be close to their real value, and this phenomenon will cause losses and losses for one group of stock buyers and rich profits for another group. The research aims to take an effective step by examining the relationship of these performance evaluation criteria with the capital structure, to help the shareholders to make the right decisions by using the most correct performance evaluation criteria, aligning the interests of managers with the owners by linking their interests and rewards with the shareholders' wealth.

    Thus, the main research question can be stated as follows:

    Is the Tehran Stock Exchange a connection?)

    1-3- The importance and necessity of conducting research

    The important goal of most companies is to create value for shareholders and maximize it. The argument of financial scholars is that in order to maximize the value of the firm, management needs to invest in assets to generate cash flow. In order to provide the needed cash, there are different possible ways in front of the manager. If the management is able to choose the optimal financial combination of debt and capital (capital structure), it can minimize the cost of capital and maximize the stock price. The final result is maximizing the wealth of shareholders and subsequently the value of the company. Therefore, the tasks of financial management of companies can be divided into three categories: investment decisions, financing and profit distribution. Financing decisions, which ultimately determine the structure or financial structure of the company, are of significant importance, because such decisions lead to the company achieving "structure" Capital structure of companies in different countries is significantly different from each other, therefore managers are forced to use various factors such as economic factors and company characteristics when deciding on the optimal combination of capital structure, and must pay attention to decisions related to financing and the effects these factors have on the capital structure. In addition, financial managers must consider the company's internal characteristics and economic factors in order to create a suitable financial structure. Variables seek to maximize the value of the company.

    On the other hand, investors are looking for a timely and reliable measure to measure the wealth of shareholders. A measure by which investors can judge about the increase or decrease in stock prices, creditors about the security of their capital and managers about the profitability of their decisions and the profitability of the company.

    This research examines the issue that if companies correctly choose their investment positions according to the operating environment and then adjust their policies in such a way as to allocate resources to the best positions, then they will be able to achieve satisfactory results, followed by the satisfaction of shareholders. and attract their creditors. In this regard, a comprehensive and general investigation of the factors affecting the company's performance seems necessary.

    1-4- Research objectives

    The main goal of this research is to help shareholders and all stakeholders to correctly and logically assess the Iranian capital market and make logical decisions for the increasing growth and advancement of our beloved country, Iran. Since it is possible for investors to convert their most liquid assets into shares, they should consider many factors when investing. The sub-objectives of this research are:

    * Using free cash flow for decision-making considering that this criterion has not been used much in internal research.

  • Contents & References of Investigating the relationship between capital structure and free cash flow and the diversity of companies with the financial performance of companies listed on the Tehran Stock Exchange

    List:

    Table of Contents

    Page Title

    Abstract 1

    Chapter One: Research Overview. 2

    1-1-Introduction. 3

    1-2- Definition of the problem. 3

    1-3- The importance and necessity of conducting research. 4

    1-4- research objectives. 6

    1-5- research hypotheses. 6

    1-6 - Research area. 6

    1-7- Research method. 6

    1-8 - Information collection method. 7

    1-9 - statistical population. 7

    1-10 - statistical sample. 7

    1-11- Operational definitions related to variables 7

    1-12- The structure of future chapters. 10

    Chapter Two: Review of the subject literature and research background. 11

    2-1 Introduction. 12

    2-2 thematic literature. 13

    2-2-1- Definition of capital structure. 13

    2-2-1-1-theories related to capital structure. 14

    2-2-1-1-1- net income theory 15

    2-2-1-1-2- net operating income theory. 15

    2-2-1-1-3-traditional theory. 15

    2-2-1-2- Various theories about the capital structure of companies 16

    2-2-1-2-1-Miller Modigliani theory. 16

    2-2-1-2-2- Modigliani and Miller's tax and theory. 17

    2-2-1-2-3- bankruptcy costs and Modigliani and Miller's theory. 17

    2-2-1-2-4- agency costs and theory of Modigliani and Miller. 17

    2-2-1-2-5- Theory of static exchange 18

    2-2-1-2-6 Theory of hierarchy of financing options. 18

    2-2-1-2-7 organizational structure theory. 19

    2-2-2- Capital cost. 19

    2-2-3- Factors affecting capital structure. 20

    2-2-3-1- Tax considerations. 20

    2-2-3-2- Types of company assets. 20

    2-2-3-3- Fluctuation of the company's operating profit. 21

    2-2-4 - free cash. 21

    2-2-4-1- Definition of free cash flow. 22

    2-2-4-2- Calculation of free cash flow. 22

    2-2-4-3- Cash flow agency problems. 23

    2-2-4-4- Effective mechanisms of free cash flow representation. 24

    2-2-5- financial performance indicators. 25

    2-2-6- Hypothesis of market efficiency. 35

    2-2-6-1- types of efficiency: 35

    2-2-6-2- different levels of efficiency. 35

    2-2-6-3- Capital channel market assumptions: 36

    2-3- Research background: 40

    2-3-1- Research conducted abroad: 40

    2-3-2- Research conducted inside the country: 41

    2-4- Summary of the chapter. 43

    Chapter three: research method. 44

    3-1- Introduction. 45

    3-2- Definition and explanation of society. 45

    3-3- Statistical sample and sampling method. 45

    3-4- Data collection method 46

    3-4-1- Library method. 47

    3-4-2- Field method. 47

    3-5- Introduction of variables and how to calculate them 47

    3-6- Data analysis method 50

    3-6-1 Correlation analysis. 50

    3-6-1-1 Correlation coefficient (r): 50

    3-6-1-2 Coefficient of determination (R2): 51

    3-6-2 Regression models: 51

    3-6-3 Hypotheses test 53

    3-6-3-1 Classic hypothesis test. 53

    3-7 research hypotheses. 54

    3-8 method of testing research hypotheses. 55

    3-8-1-1 Mana test of variables 56

    3-8-1-2 Unit root test. 56

    3-8-1-3 Dickey - Generalized Fuller test (ADF) 56

    3-9- Limitations of the research. 57

    3-10 chapter summary. 57

    Chapter four: research findings. 59

    4-1) Introduction. 60

    4-2) Descriptive data statistics 60

    4-3) Inferential statistics. 62

    4-3-1) Reliability test of variables 62

    4-3-2) Determining the appropriate model to estimate the regression model. 63

    4-3-3) Classic hypothesis test of regression. 64

    4-3-3-1) Normality test. 64

    4-3-3-2) Test of independence of errors 65

    3-3-4-3) Heterogeneity of variances 66

    4-4) Results of fitting regression models. 66

    4-4-1) Test of the first hypothesis. 66

    4-4-2) Second hypothesis test. 68

    4-4-3) Test of the third hypothesis. 69

    4-5- Summary of the research: 71

    Chapter five: introduction, conclusion and suggestions. 72

    5-1- Introduction. 73

    5-2- Research summary. 74

    5-3- The result of discussion and comparison. 75

    5-4- Research limitations. 75

    5-5- Research proposals: 76

    5-5-1- Proposals resulting from research.76

    5-5-2- Suggestion for future research. 77

    Resources. 86

    Appendices 98

    Source:

    Sources

    1. Abrishami, H. 1381, "Applied Econometrics", Tehran University Publications.

    2. Ahmadpour, A. Vamir Rasaian, 2016, "The relationship between risk criteria and the difference between buying and selling shares in Tehran Stock Exchange", Accounting and Auditing Reviews, No. 64, page 6

    3. Ashrafzadeh, Mehrgan, 1387, "Panel Data Econometrics", Tehran University Cooperative Publications, (pages 14-15-16)

    4. Ahmadzadeh, M. and Hekaran, 2016, "Examining the capital structure and financial resources of the Agricultural Bank and providing suitable solutions to optimize it", Accounting and Auditing Review, No. 83, page 3

    5. Ahmadpour, A. and Amir Rasaian, 2015, "The relationship between financial information and the suggested difference in the purchase and sale price of stocks", Noorsafagheh magazine, 82-83

    6. Ahmadpour, A. and Amin Salimi, 1384, "The effect of industry and size on the capital structure of companies listed on the Tehran Stock Exchange", Journal of Social Sciences of Shiraz University, Number 1, Accounting Special Issue (page 13-15)

    7. Ismail Zadeh Moghri, 2008, "Searching for the optimal capital structure", Accountant magazine, number, 143 pages 24-03

    8. Yazidnia, N. Vamir Rasaiyan, 1833, "Investigating the relationship between financial leverage and liquidity of assets in the Tehran Stock Exchange", Financial Accounting Quarterly, No. 2, (24-23)

    9. Izadinia, N. and Mohsen Rahimi Dastjardi, 1833, "Effect of capital structure on the rate of return on shares and income per share", Accounting Research, No. 8, page 0-8

    10. Afshan, "The Relationship between the Cash and the Value of the Company", the Arak Azad University

    A company on the capital structure of companies admitted to the Tehran Stock Exchange". Financial accounting research journal, fifth year, number two

    13. Khaki, G.R., 1832, "Research method with an approach to writing a thesis", Rekasal Publications, page 155.

    14. Khaleghi Moghadam, H. Varafik Baghomian, 1835, "A review of theories of capital structure", Noor magazine, number 6, Page 53-03. 15. Khosh Taynet, A., 1834, "Examination of the information content of accounting profit as a traditional measure of performance against residual profit and economic added value as economic criteria", thesis, supervisor of Dr. Khosh Taynet, Iran's Higher Institute of Banking, Master of Accounting. 16. Rasayan, A. , 1833, "Liquidity of shares and related factors", Official Accountant Quarterly, No. 13.

    17. Rasayan, A. Vessan Mehrani, 1833, "Investigating the relationship between stock liquidity criteria and annual stock returns in Tehran Stock Exchange", Accounting Journal of Shiraz University, number 1, page 222

    18. Sinaii, H. 1834, "Investigating the effect of internal factors of companies on the formation of the capital structure of Tehran Stock Exchange member companies", Accounting and Auditing Review, No. 63, Page 01-43.

    19. Sojadi, H; Mohammadi, K; Abbasi, Sh. 2013, "Evaluation of the impact of capital structure selection on the performance of listed companies" financial accounting scientific research quarterly. Third year number 3

    20. Salvati, Sh. and Amir Rasaian, 2014, "Examining the relationship between capital structure and stock liquidity in Iran", Economic Journal, No. 48, pages 143-166.

    21. Fakhari, H. Venerges Faleh Mohammadi, 1833, "Investigation of the effect of information disclosure on the liquidity of shares of companies listed on the Tehran Stock Exchange", Accounting Research, No. 6, page 148-163.

    22. Fartukzadeh, 1383, "Investigation of factors affecting the liquidity of futures contracts in Iran Commodity Exchange", Accounting and Audit Review, No. 53, page 45-46.

    23. Arabsalehi, Mehdi; Moayed Far, Rosita; Karimi, Sejad, 1381, "Investigating the relationship between capital structure and performance evaluation accounting criteria in Tehran Stock Exchange listed companies". Financial Research, Volume 11, Number 23.

    24. Kashanipour, M., 2013, "Investigating the relationship between some mechanisms of the corporate governance system and market liquidity", Financial Accounting Research Journal, second issue, page 40-44

    25. Mashaikh, Sh. Vosmaneh Shahrokhi, 1385, "Effective factors on capital structure", Noor magazine, number 104, page 13-18.

    26. Namazi, M.

Investigating the relationship between capital structure and free cash flow and the diversity of companies with the financial performance of companies listed on the Tehran Stock Exchange
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