Investigating the effect of financing tools on the value of companies admitted to the Tehran Stock Exchange 2015-2016

Dissertation for receiving the degree of Master of Business Administration (M.A)

Trend: Finance

Abstract

Companies use different financial sources in order to implement profitable projects and achieve maximum efficiency in order to increase the interests of their shareholders. In general, the main goal of companies and for-profit institutions is to earn more profit and then increase the wealth of shareholders, share price and finally the value of the company. One of the ways to gain profit and value for companies is to choose the right financing method. The purpose of this research is to investigate the effect of financing tools on the value of the company. The number of hypotheses tested in this research is 12, among which 2 are main hypotheses and 10 are secondary hypotheses. This research is correlational and survey in terms of type and practical in terms of purpose. The sampling method in this simple random research and a statistical sample of this research has been selected for six equipment industries, food industries, chemical industries, non-metallic products, motor vehicles and heavy metals.  The analysis method in this research is Pearson and Spearman correlation coefficient and using multivariate regression analysis. The findings of this research indicate that all short-term and long-term financing methods have been verified with the value of companies listed on the Tehran Stock Exchange between 1385 and 1391. Keywords: short-term financing tools, long-term financing tools, company value, companies listed on the Tehran Stock Exchange. Chapter 1: Research overview. Introduction:

Companies use different financial resources in order to implement profitable projects and achieve maximum efficiency in order to increase the interests of their shareholders. The ability of companies to identify internal or external sources to provide capital is considered one of the main factors of their growth and development. A company's ability to access external financing is a key factor in its development, growth and survival (Ramazani, 2013). Companies' access to foreign financing increases their competitiveness. In addition, access to financial resources significantly facilitates the growth of the company. point out that credit constraints have a negative effect on innovation and investment expenditures; Access to financial resources has a positive effect on the growth of the company. Based on this, one of the most important financial decisions is the way of financing economic enterprises, which plays a significant role in the continuity and growth of their profitability (Najafi, 2015). The ability of companies to obtain financial resources inside and outside the company in order to invest and implement its development plans is considered one of the main factors of growth and profitability. Companies often meet their needs when they need new financial resources, or by using the company's internal resources, including retained earnings and reserves. or through receiving loans and credits from banks and financial and credit institutions, or issuing shares and other types of debt and capital securities. Of course, the cost of financing is an important factor in companies' decisions. Internal financing does not involve any cost for companies and can bring the company to horizons beyond profitability in the long term (Momeni, 2009).

1-2 Statement of the problem

Economic institutions and enterprises, especially those active in the industrial sector, need large capitals for the continuation of their life and production activities as well as for the development of activities. Also, these institutions and economic enterprises have a strong dependence on financial markets to provide their required capital (Corbett and Jenkinson [1], 2005). The role of these markets is to provide necessary funds for institutions and companies. One of the basic points of concern for financial managers of economic enterprises is the methods and amount of financing (Brelid and Mirz [2], 2009). The types of financial resources in the country are divided into two categories: financial resources without cost and financial resources with cost. Non-cost sources of finance include advances from customers, trade creditors, dividends payable and expenses payable. Financial resources with cost are divided into two categories: internal resources (accumulated profit) and external resources (short-term and long-term facilities and issuance of new shares) (Meerz[3], 2008). In general, the main goal of companies and for-profit institutions is to earn more profit and then increase the wealth of shareholders, stock price and ultimately the value of the company (Halsey [4], 2010). One of the ways to gain profit and value for companies is to choose the appropriate method of financing (Penman [5], 2009).In recent years, financing methods have attracted the attention of financial managers of companies and commercial institutions due to the benefits they have had (Fernandez [6], 2011). Therefore, in this research, the effect of financing methods on companies listed in Tehran Stock Exchange is studied and investigated, and considering the advantages of financing methods in this area, we are looking for the question whether these methods have an effect on the value of companies listed in Tehran Stock Exchange or not? and paying dividends to shareholders have access to multiple sources of finance. These sources include cash from operational activities and asset sales (as internal financing sources), bank loan borrowing, partnership bond issuance, and new stock issuance (as external financing sources). The ability of companies to determine the appropriate financial resources and make correct decisions in this regard is one of the main factors of the company's success (Lotfi, 2015). The most important goal that the management should pay attention to when choosing the financing method is to increase the shareholders' wealth. That is, by considering the cost of each of the different financing sources and its effects on the company's return and risk, choose sources that minimize financing costs. The appropriate combination of financing sources is associated with characteristics such as low capital cost and higher rate of return (Momeni, 2009). The review of previous studies shows that most of the studies of financing methods and its effect on returns have emphasized on things such as the relationship between the selection of financing sources and company returns, the preference of extra-organizational sources of financing to internal sources, or vice versa, reaching an optimal capital structure and the relationship between capital structure and risk. According to the explanations provided and considering that among the most useful extra-organizational sources of financing among the companies active in the Tehran Stock Exchange, are bank loans and capital increases. The main tasks of financial management are decision-making related to financing, investment and profit distribution (Penman [7], 2009).  Each of these decisions is related to the company's goal, and making decisions in the context of the optimal combination of these three items is maximizing the company's value for shareholders. Therefore, it is very important to identify the priority of financing methods and the factors affecting them and to choose appropriate methods in order to maximize shareholders' wealth (Cheng [8], 2009). The relationship between financing through commercial credits and company value. 1-4-1-1-2 Knowing the relationship between financing through short-term bank loans and company value. 1-4-1-1-3 Knowing the relationship between financing through short-term advances and company value. 1-4-1-1-4 Knowing the relationship between financing through income tax reserves and company value.

1-4-1-1-5 Recognizing the relationship between financing through non-commercial credits (other documents and accounts payable) and company value.

1-4-1-1-6 Recognizing the relationship between financing through proposed dividends to be paid and company value.

1-4-1 Main objective 2: Recognizing the relationship between medium-term and long-term financing methods of company valuation

1-4-1-2 Objectives Sub

1-4-1-2-1 Recognizing the relationship between financing through long-term loans and company value.

1-4-1-2-2 Recognizing the relationship between financing through employee retirement benefit reserves and company value.

1-4-1-2-3 Recognizing the relationship between financing through the issuance of ordinary shares and company value.

1-4-1-2-4 Recognizing the relationship between financing through Legal reserve and company value. 1-5 Research Hypotheses 1-5-1 The first main hypothesis: There is a significant relationship between short-term financing methods and company value. There is a significant relationship between financing through short-term bank loans and company value. 1-5-1-1-3 There is a significant relationship between financing through short-term advances and company value.