Investigating the effect of growth and financial strength variables on the financial leverage: Evidence from the Tehran Stock Exchange

Dadashi, Iman; Mansourinia, Elham; Emamgholipour, Milad; Bagheri, Seyedeh Maryam Babanejad; Arabi, Ali Mohammadpour

doi:10.5267/j.msl.2013.03.014

Cited by 3 publications

(4 citation statements)

References 6 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…They assume that a good quality of disclosure reduces the default risk of the company estimated by the creditors based on its disclosure policy, which consequently reduce its cost of debt. These researches show that the voluntary information disclosure in the annual reports has a negative impact on the cost of the debt and, therefore, they supported the hypothesis of the usefulness of the information disclosed through the traditional means of communications for the creditors (Sengupta, 1998; Najah and Jarboui, 2013; Dadashi et al , 2013; Guidara et al , 2014).…”

Section: Literature Review and Hypothesis Developmentsupporting

confidence: 55%

“…It corresponds to the rate of return required by the creditors in order to finance the company. It includes interest that must be paid in consideration of debts: short-term and long-term debts (Dadashi et al , 2013). We compute this variable as the ratio of the interest expenses in 2017 to the sum of long-term and short-term financial debt in 2017.…”

Section: Methodsmentioning

confidence: 99%

“…This measure corresponds to the interest rate of the company’s debts and it is the most widely used in previous empirical studies. It was used by Francis et al , 2005; Orens et al , 2009; Orens et al , 2010; Farooq and Derrabi, 2012; Dadashi et al , 2013; Najah and Jarboui, 2013; Guidara et al , 2014; Farooq and Jabbouri, 2015; Saker et al , 2015.…”

Section: Methodsmentioning

confidence: 99%

See 2 more Smart Citations

Web-based disclosure and the cost of debt: MENA countries evidence

Abdi

Omri

2020

JFRA

View full text Add to dashboard Cite

Purpose The aim of this study is to investigate the effect of web - based disclosure on the cost of debt for the MENA region setting. Design/methodology/approach The sample of this paper consists of 237 MENA listed non-financial companies for the year 2017. Multiple regression models were used to examine the impact of online disclosure on the cost of debt. Content analysis is used to measure the extent of web-based disclosure. Findings The results reveal that there is a negative and significant association between the web-based disclosure and the company’s cost of debt. These results support the hypothesis of the economic utility of the information disclosed on the website for creditors in this region. Practical implications The results of the study have important implications for managers in the MENA region. It is necessary for managers to improve the company’s transparency through web-based disclosure. The companies must benefit from the different technologies offered by the Internet in order to offer to the creditors unlimited access to up to date information. In fact, web-based disclosure may mitigate the information asymmetry, the uncertainty of creditors and, consequently, reduces the cost of debt. 10; 10;Moreover, the results of the study provide empirical evidence for the advantages of voluntary web-based disclosure. The results highlight the importance to companies and regulators of understanding the benefits of using the website as a means of information disclosure. The regulators in MENA countries can rely on these results to establish suitable policies to improve the quality of web-based disclosure. The regulators need also to put in rules in relation to the online disclosure. In fact, an understanding of web-based disclosure is important for regulators and companies. Given the positive effect of online disclosure (the reduction of the cost of debt), knowledge about the economic consequences of web-based disclosure would enable companies in the MENA region to optimize their online disclosure policies. Originality/value This study, added to the existing literature by examining the consequences of online disclosure practices in MENA countries. Most previous studies conducted in this region were limited to analyzing the determinants of the company’s web-based disclosure. This paper would extend the literature on the online disclosure practices by investigating the association between these practices and the cost of debt in a developing economics: the MENA region. Previous studies were limited to testing this association only in developed countries.

show abstract

Section: Literature Review and Hypothesis Developmentsupporting

confidence: 55%

Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

See 1 more Smart Citation

Web-based disclosure and the cost of debt: MENA countries evidence

Abdi

Omri

2020

JFRA

View full text Add to dashboard Cite

show abstract

“…To calculate an accurate figure for this cost, we can aggregate all the interest payments made during a certain year and divide that number by the sum of the total annual short-term and long-term financial obligations. Previous researchers, such as [3,25,[82][83][84][85], have extensively used this interest rate as a measurement.…”

Section: Measurement Of Dependent Variablementioning

confidence: 99%

Exploring the Interplay between Sustainability and Debt Costs in an Emerging Market: Does Financial Distress Matter?

et al. 2023

View full text Add to dashboard Cite

Embracing corporate sustainability has emerged as a crucial strategy for companies to bolster their competitive edge and reputation. This research delves into the connection between environmental, social, and governance practices (ESG) and the cost of debt, as well as the moderating role of financial distress within this connection. By analyzing data from Saudi-listed firms between 2013 and 2021, we discovered that ESG practices have a notable negative impact on borrowing costs. This implies that organizations with increased transparency in their ESG disclosure gain access to external financial resources under more favorable terms. Additionally, we observed that the effect of ESG on the cost of debt is significantly and negatively moderated by the financial distress encountered by a firm. To bolster the credibility of these findings, dynamic generalized method of moments (GMM) models were utilized to address any potential endogeneity concerns, thereby enhancing the strength and resilience of the outcomes. The findings of this paper hold substantial value for investors, lenders, corporate management, and policymakers when considering the implementation and significance of a company’s ESG practices.

show abstract

Investigating the effect of growth and financial strength variables on the financial leverage: Evidence from the Tehran Stock Exchange

Dadashi¹,

Mansourinia²,

Emamgholipour³

et al. 2013

10.5267/j.msl

Self Cite

View full text Add to dashboard Cite

The primary objective of this study is to investigate the effect of growth and financial strength variables on the financial leverage for some listed companies in the Tehran Stock Exchange. For this purpose, a sample of 700 firm-years among listed companies in the Tehran Stock Exchange over the period 2006-2010 was examined. In the present study, the growth variables, including asset growth, profit growth and sales growth; and financial strength calculated by the Altman Z-bankruptcy model have been considered as independent variables. In addition, the ratios of long-term debt to total assets, long-term debt to fixed assets, total long-term debt and short-term receivable facilities to equity capital and total long-term debt and short-term receivable facilities to total assets are used as measures of financial leverage and dependent variables. The results indicate that there is a negative and significant relationship between assets growth and some indexes of financial leverage. There is also a positive and significant relationship between the variables of profit growth, sales growth and financial strength with financial leverage measures.

show abstract

Investigating the effect of growth and financial strength variables on the financial leverage: Evidence from the Tehran Stock Exchange

Cited by 3 publications

References 6 publications

Web-based disclosure and the cost of debt: MENA countries evidence

Web-based disclosure and the cost of debt: MENA countries evidence

Exploring the Interplay between Sustainability and Debt Costs in an Emerging Market: Does Financial Distress Matter?

Investigating the effect of growth and financial strength variables on the financial leverage: Evidence from the Tehran Stock Exchange

Contact Info

Product

Resources

About