Examine the Effect of  Market Past  Values on Investment  Decisions and  Cumulative  Leverage  Changes of  Firms from the  Perspective of Market  Timing  Theory

Shekarkhah, Javad; Tamandeh, Seyyed Hamid

doi:10.22054/qjma.2020.47068.2071

Document Type : Research Paper

Authors

¹ Assistant Prof of Accounting, Allameh Tabataba'i University.

² MSc of Accounting Management ,Allameh Tabataba&#039;i University

https://doi.org/10.22054/qjma.2020.47068.2071

Abstract

Cognition and awareness of the firms' capital structure is important for potential shareholders and investors, and information on capital structure is used by creditors. The financing decisions of many firms depend on the market value of the stock. firms are issued when stocks are high and when they are redeemed when stocks are low, the reason for this action is obtaining more finance. The purpose of this study is to examine the effect of market past values on investment decisions and Cumulative leverage changes of firms from the perspective of market timing theory.In this study, using financial information of 134 companies listed on Tehran Stock Exchange over the period of 2012-2018 and using generalized least square (GLS) regression analysis, the market timing theory was tested with growth opportunities and leverage changes of companies. Results of the study suggest that in a 95% certainty level, the first hypothesis was confirmed i.e. past market values have positive and significant impact on investment decisions. Also, the second hypothesis was confirmed i.e. past market values have negative and significant impact on Cumulative leverage changes. These observations confirm the market timing theory, that is, companies’ growth opportunities are controlled via the ratio, and leverage has a negative relationship with the ratio. Also variables of ratio of fixed assets and size of company have a significant and negative impact on investment decisions, while profitability, leverage, market value to liquidity ratio and liquidity have positive and significant effect on investment decisions. Finally, profitability and the ratio of total liabilities to total assets have a significant negative effect on the cumulative leverage changes.

Keywords

References

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Empirical Studies in Financial Accounting

Examine the Effect of Market Past Values on Investment Decisions and Cumulative Leverage Changes of Firms from the Perspective of Market Timing Theory

References

References

Volume 17, Issue 65
April 2020
Pages 61-83

Examine the Effect of Market Past Values on Investment Decisions and Cumulative Leverage Changes of Firms from the Perspective of Market Timing Theory

References

References

Volume 17, Issue 65April 2020Pages 61-83

Volume 17, Issue 65
April 2020
Pages 61-83