The Effect of Corporate Asset Restructuring Sensitivity on The Target Leverage of Companies listed in Tehran Stock Exchange

Document Type : Research Paper

Authors

1 Assistant Professor, Department of Management, Shahrood Branch, Islamic Azad University, Shahrood, Iran

2 Associate Professor of Accounting, Shahrood Branch, Islamic Azad University, Shahrood, Iran

3 Accounting Department, Payame Noor University, Iran

Abstract

Achieving an optimal leverage is one of the main goals and priorities of corporate finance managers to achieve more revenue through cost management. Since the lack of an inappropriate capital structure in each company affects the different fields of company activity, it can lead to issues such as inefficiency and lack of codification of appropriate strategies for financing. The purpose of this research is investigating the effect of corporate asset restructuring sensitivity on the target leverage ratios of companies listed in Tehran Stock Exchange. The research period is 5 years from 2011 to 2015. The statistical population of this study is all of the companies listed in Tehran Stock Exchange. 102 companies were selected by systematic sampling. Based on this, 510 views were taken on the basis of the year-company. The results of this study showed that according to the variable coefficient and level of error, the sensitivity of asset restructuring, respectively, has a negative and significant relationship with the leverage deviation. It was also found that the first quartile companies (which are most sensitive to asset restructuring), adjusting their real leverage towards the target leverage at 85% per annum. Capital structure adjustment speed for the first quartile companies is 16% higher than the total companies surveyed.
 

Keywords

References

-      جهانشاد، آزیتا. فلاح مهدی دوست، زهرا. (1395). شکاف بین اهرم مالی واقعی و اهرم بهینه با توجه به ریسک ورشکستگی شرکت‌ها، فصلنامه علمی و پژوهشی دانش سرمایه‌گذاری، سال پنجم، شماره 19، پاییز، صص. 67-81.
-      حقیقی طلب، بهاره. موسوی، سید محمدصادق. (1394). تجدید ارزیابی دارایی‌ها از تئوری تا اجرا، فصلنامه حسابداری دانشگاه فردوسی، شماره 24.
-      خدامی پور، احمد. انصاری، عبد المهدی. نمازیان، علی. (1388). بررسی تأثیر تجدید ارزیابی دارایی شرکت‌ها بر افشای دارایی‌ها و مالیات بر درآمد شرکت‌ها، فصلنامه پژوهشنامه مالیاتی، سال 17، شماره 7، صص. 101-120.
-      دولو، مریم. رضائیان، علیرضا. (1395). انحراف از اهرم هدف، بی‌تعادلی در جریان نقدی و تعدیل ساختار سرمایه،  پژوهش‌های مالی، دوره‌ی 18، شماره 3، تابستان، صص. 278-306.
-      روح‌الله زاده، م. (1382). بررسی آثار مالی تجدید ارزیابی دارایی‌های ثابت در صنعت برق ایران، پایان‌نامه کارشناسی ارشد مدیریت مالی، موسسه  پژوهش‌های و آموزش مدیریت وزارت نیرو.
-      مؤمن زاده، مهدی. (1392). تجدید ارزیابی دارایی‌های ثابت در ایران هست‌ها و بایدها، ماهنامه بازار و سرمایه، شماره 47، بهمن، صص. 32-48.
-      هاشمی، آ. کشاورز مهر، د. (1393). بررسی عدم تقارن سرعت تعدیل ساختار سرمایه در شرکت‌های پذیرفته‌شده در بورس اوراق بهادار ایران، فصلنامه مهندسی مالی و سرمایه‌گذاری، 23 (1)، صص. 59-78.
-      Ahn, S. Denis, D. J. & Denis, K. D. (2016). Leverage and investment in diversified firms. Journal of Financial Economics, 79, pp.317-337.
-      Antão, P. and Bonfim, D. (2014). The Dynamics of Capital Structure Decisions, Available at SSRN: http: //ssrn. com/abstract=2512249.
-      Barclay, M. J. & Smith, C. W. (2005). The capital structure puzzle: The evidence revisited. Journal of Applied Corporate Finance, 17(1), pp.8-17.
-      Brown, P. Izan, H. Y. & Loh, A. L. (1992). Fixed asset revaluations and managerial incentives. Abacus, 28(1), pp.57-36.
-      Choi, T. Pae, J and Yoo, C. (2013). Demand for Fair Value Accounting: The Case of Asset Revaluations in Private Versus Public Firms. KAIST Business School Working Paper Series No. 01.
-      Clark, M. B. Maguire W. & Davies, T. (2006). Business Accounting and Finance in New Zealand. McGraw Hill.
-      Cook, Douglas O. Fu, Xudong, Tang, Tian, Are Target Leverage Ratios Stable? Investigating the Impact of Corporate Asset Restructuring, Journal of Empirical Finance (2015), doi: 10.1016/j.jempfin.2015.11.003.
-      Davaloo, M. Rezayeen, A. (2016). Deviation from target leverage, Unbalance in cash flow and capital structure adjustment, Financial research, Volume 18, Number 3, Summer, 308-230. [In Persian]
-      DeAngelo, H. and Roll, R. (2013). How stable are corporate capital structures? Journal of Finance forthcoming.
-      Denis, D. Shome, D. 2005. An empirical investigation of corporate asset downsizing. Journal of Corporate Finance 11, pp.427-448.
-      Fama, E. F. & French, K. R. (2005). Financing decisions: who issues stock? Journal of financial economics, 76(3), pp.549-582.
-      Flannery M.J. Rangan K.P.  (2006). Partial Adjustment toward Target Capital Structures. Journal of Financial Economics 2006; 79:469–506.
-      Flannery, M. J. Rangan K. P. (2006). Partial Adjustment toward Target Capital Structures. Journal of Financial Economics 2006; 79, pp.469–506.
-      Frank, M. Z. & Goyal, V. K. (2003). Testing the pecking order theory of capital structure. Journal of financial economics, 67(2), pp.217-248.
-      Frank, Murray, and Tao Shen. (2014). Common factors in corporate capital structures, Working paper, University of Minnesota.
-      Graham, J. Harvey, C. 2001. The theory and practice of corporate finance: evidence from the field. Journal of Financial Economics 60, pp.186-243.
-      Green, T. Clifton, Jegadeesh, N. (2006). Trade-off, Timing, and Capital Structure. EmoryUniversity Working Paper
-      Haghightalab, B. Moosavi, S, M, S. (2015). Evaluation of Assets from Theory to Implement, Quarterly of Accounting, Ferdowsi University, No. 24. [In Persian]
-      Harford, J. Klasa, S. & Walcott, N. (2009). Do firms have leverage targets? Evidence from acquisitions. Journal of Financial Economics, 93(1), pp.1-14. DOI: 10.1016/j.jfineco.2008.07.006.
-      Hashemi, A. Keshavarzmehr, D. (2014). Investigating the Asymmetry of the Rate of Capital Adjustment Speed in Companies Listed in Tehran Stock Exchange, Journal of Engineering Finance and Investment, 23 (1), pp.59-78. [In Persian].
-      Hovakimian, A. And Li, G.(2011). In search of conclusive evidence: How to test for adjustment to target capital structure. Journal of Corporate Finance,Vol 17, pp: 33–44.
-      Jalilvand, A. Harris, R. (1984). Corporate Behavior in Adjusting to Capital Structure and Dividend Targets: An Econometric Study, The Journal of Finance Vol. 39, No. 1 (Mar),  pp: 127-145.
-      Jorheden, L. Fallenius, M. (2007). Target Capital Structure and Adjustment Speed- A Dynamic Panel Data Analysis of Swedish Firms, Master's Thesis, Lund University.
-      Kayhan A. Titman S. (2007). Firms’ Histories and Their Capital Structure, Journal of Financial Economics 2007; 83, pp.1–32.
-      Khodamipoor, A. Ansari, A. Namaziyan, A. (2016). The effect of the revaluation of assets on the disclosure of assets on corporate income Tax, Tax Research Journal, Vol 17, Issue 7, pp.101-120. [In Persian]
-      Korteweg, A. (2010). Net Benefits to Leverage, The Journal of Finance, Vol, 65, Issue 6, No 6, pp.2137-2170.
-      Lemmon M.L. Roberts M.R. Zender J.F. (2008) Back to the Beginning: Persistence and the Cross-Section of Corporate Capital Structure. The Journal of Finance 2008; 63, pp.1575–1607.
-      Lin, Y. N. & Peasnell, K. V. (2000 b). Asset revaluation and current cost accounting: UK corporate disclosure decisions in. British Accounting Review, 32, pp.161-187.
-      Marchica, M.T. Mura, R. (2010). Financial flexibility, investment ability, and firm value: evidence from firms with spare debt capacity. Financ. Manage. 39 (4), pp.1339–1365.
-      Modigliani, F. and Miller, M. (1963), "Corporate income taxes and the cost of capital: a correction", American Economic Review, Vol. 53, June, pp. 443-53.
-      Momenzadeh, M. (2013). Renewal of fixed assets in Iran. Nuclei and Beams, Monthly in the Market and Capital, No. 47, Bahman, 32-48. [In Persian].
-      Rajan, R. G. Zingales, L. (1995). What do we know about capital structure? some evidence from international data. J. Financ. 50 (5), pp.1421–1460.
-      Roberts,  M. (2001). The dynamics of capital structure: An empirical analysis of a partially observable system, Working Paper, Duke University.
-      Rooholahzadeh, M. (2003). The study of the financial effects of the reconsideration of fixed assets in Iran's power industry, Master's thesis on financial management, the Institute of Research and Management of the Ministry of Energy Management. [In                 Persian].
-      Sandra, Laurent. (2010). Capital structure decision: the use of preference share and convertible debt in the uk.www.ssrn.com. pp.12-16.
-      Strebulaev, I. A. (2007). Do tests of capital structure theory mean what they say? The Journal of Finance, 62(4), pp.1747-1787.
-      Watts, R. L. & Zimmerman, J. L. (1990). Positive Accounting Theory: A ten year perspective. Accounting Review, January, pp.131-156.
-      Zhou, Qing, Tan, Kelvin Jui Keng, Faff, Robert, Zhu, Yushu. (2016). Deviation from target capital structure, cost of equity and speed of adjustment, Journal of Corporate Finance, doi: 10.1016/j.jcorpfin.2016.06.002.

Files

History

  • Receive Date: 29 October 2017
  • Revise Date: 29 March 2018
  • Accept Date: 06 May 2018

Share

How to cite

Statistics