The Impact of Monetary Policy on the Performance of Selected Firms Active in the Tehran Stock Exchange with Emphasis on the Financial Constraints Channel

Document Type : applicative

Authors

1 PhD Student of Economics, Department of Economics, Shiraz University

2 Professor of Economics, Department of Economics, Shiraz University

3 Associate Professor of Economics, Department of Economics, Shiraz University

10.30473/jier.2026.76065.1518

Abstract

A B S T R A C T 
Monetary policy refers to the set of measures that monetary policymakers employ to control economic activities and achieve economic objectives. The impact of monetary policy on various micro and macroeconomic sectors takes shape through a process known as the monetary policy transmission mechanism. This process begins with the application of monetary policy tools and culminates in output and other final real economic variables. The objective of this article is to examine the effect of monetary policy on the performance of firms facing financial constraints. For this purpose, quarterly data from 79 non-financial firms active in the Tehran Stock Exchange during the period from the second quarter of 2013 to the first quarter of 2024, along with the Generalized Method of Moments (GMM) technique, were used. Initially, the role of the balance sheet channel on firm performance was confirmed, indicating that these firms face financial constraints. Furthermore, with the implementation of expansionary monetary policy, the impact of financial constraints on firm performance diminished. Finally, one of the economic variables affecting firms' ability to cope with financial constraints was their asset size, which was incorporated orthogonally into the final model. The results indicated that as size increases, due to a reduction in the degree of financial constraints, the sensitivity of firm performance to the monetary policy implemented by economic policymakers decreases. Consequently, the impact of financial constraints on the composite index of firm performance changed from -0.8065 in the initial model to -0.0631 in the final model, which included the firm size variable.

Keywords

Main Subjects

References

Rezagholizadeh, M. (2025). Analysis of the Impact of Exchange Rates and Financial Leverage on Corporate Financial Fragility: Empirical Evidence from Iran. Journal of Economic Policies and Research, 4(2), 113-138. DOI: 10.22034/jepr.2025.142795.1218  (in persian).
Dögüs, I. (2025). Monetary policy, market concentration and financial instability: The case of the USA. In Central Banking, Monetary Policy and Financial In/Stability (pp. 204-222). Edward Elgar Publishing. doi.org/10.4337/9781035302154.00018
Bonaparte, Y. (2025). Presidential versus parliamentary: Political system and stock market volatility. European Journal of Political Economy, 87, 102674.‏ DOI: 10.1016/j.ejpoleco.2025.102674
Arin, K. P., Kaplan, S., Polyzos, E., & Spagnolo, N. (2025). Stock market responses to monetary policy shocks: Firm-level evidence. Journal of Macroeconomics, 83, 103646.‏ doi.org/10.1016/j.jmacro.2024.103646
Switzer, D., & Teodoro, M. (2025). Public enterprise pricing as redistributive policy. Policy Studies Journal, 53, 365 - 387. https://doi.org/10.1111/psj.70017.
Hadian, E. & Izady, B. (2024). Asymmetric Effects of Nominal Exchange Rate Changes on the Stock Value of the Petrochemical Industry in Iran, Emphasizing the Role of Monetary Policy: The Application of Nonlinear Autoregressive Distributed Lag Model. Industrial Economics Researches, 8(27), 47-59. DOI: 10.30473/jier.2024.71303.1452. (in Persian).
Nguyen, T. H. (2024). The impact of capital structure on the performance of state-invested enterprises in Vietnam. Cogent Economics & Finance, 12(1), 2399955.‏ DOI: 10.1080/23322039.2024.2399955.
Cloyne, J., Dimsdale, N., & Postel-Vinay, N. (2024). Taxes and growth: new narrative evidence from interwar Britain. Review of Economic Studies, 91(4), 2168-2200.‏ doi.org/10.1093/restud/rdad081
Roudari, S., Ahmadian-Yazdi, F., Arabi, S. H., & Hammoudeh, S. (2023). Sanctions and Iranian stock market: Does the institutional quality matter?. Borsa Istanbul Review, 23(4), 919-935.‏ doi.org/10.1016/j.bir.2023.03.006
Ascari, G., Fasani, S., Grazzini, J., & Rossi, L. (2023). Endogenous uncertainty and the macroeconomic impact of shocks to inflation expectations. Journal of Monetary Economics, 140, 48-S63.‏ doi.org/10.1016/j.jmoneco.2023.04.002.
Benchimol, Jonathan and Saadon, Yossi and Segev, Nimrod, Stock Market Reaction to Monetary Policy Surprises Under Uncertainty. International Review of Financial Analysis, Elsevier, vol. 89, no. 102783, August 2023 [10.1016/j.irfa.2023.102783], Available at SSRN: https://ssrn.com/abstract=4534573 or http://dx.doi.org/10.1016/j.irfa.2023.102783
Lastauskas, P., & Nguyen, A. D. M. (2023). Global impacts of US monetary policy uncertainty shocks. Journal of International Economics, 145, 103830.‏ DOI: 10.1016/j.jinteco.2023.103830.
Laine, O. M., & Pihlajamaa, M. (2023). Asymmetric Effects of Conventional and Unconventional Monetary Policy When Rates are Low. Bank of Finland Research Discussio. 31(2), 32-57, Available at SRN: https://ssrn.com/abstract=4391781 or http://dx.doi.org/10.2139/ssrn.4391781
Orooji Z, Dargahi, H (2023). Liquidity Demand of Heterogeneous Firms in the Economy of Iran: Microfoundation Approach. qjerp 2023; 31 (105) :7-38, doi: 10.52547/qjerp.31.105.1 (in Persian).
Naderi M, Hadizadeh A, Mirzaporbabahan A (2023). Investigating the Effects of Monetary Policy Shocks on Stock Price Bubbles: The Application of Structural Vector Autoregression with Time-Varying Parameters (SVAR-TVP). Original Research Article/ Vol.23, No.2, Summer 2023, P:193-218. DOI: 20.1001.1.17356768.1402.23.2.8.2 (in Persian).
Tovabnejadesfahani M, Mahmoudzadeh M, Sufimajidpor M, Gholamabri A (2023). The Impact of Monetary and Currency Policies on the Default Risk of Commercial Banks with a Sanctions Approach. Journal of Iranian Economic Issues, Institute for Humanities and Cultural Studies Biannual Journal, Vol. 10, No. 1, Spring and Summer 2023, 37-60. Doi: 10.30465/ce.2023.45066.1873 (in Persian).
Osmani F, Cheshomi A, Salehnia N, Ahmadi Shadmehri M T. (2023). The Reaction of Stock Returns of Iranian Different Industries to Inflation and Interest Rates with the Panel-ARDL Approach. JEPR. 28(1), 53-75. doi:10.61186/jpbud.28.1.53 (in Persian).
Hosseinzadeh, H., Asgharpour, H. & Haghighat, J. (2023). Nonlinear Transmission Mechanisms of Monetary Policy into industrial sector: A Markov Switching Vector Auto Regressive Approach (MSVAR). Industrial Economics Researches, 6(22), 65-88. DOI: 10.30473/JIER.2023.65966.1353 (in Persian).
Kim, J. (2023). Stock market reaction to US interest rate hike: evidence from an emerging market. Heliyon, 9(5), 118-137.‏ DOI: 10.1016/j.heliyon.2023.e15758
Fu, H., Guo, W., Sun, Z., & Xia, T. (2023). Asymmetric impact of natural resources rent, monetary and fiscal policies on environmental sustainability in BRICS countries. Resources Policy, 82, 103444.‏ DOI: 10.1016/j.resourpol.2023.103444.
Barkhordari S, Abdoli G, Amiri R (2022). The Effects of Exchange Rate Shock on the Value of Selected Industries in the Tehran Stock Exchange with TVP-FAVAR Approach, Applied Economics Studies, 10(40), 10-39. Doi: 10.22084/aes.2021.22808.3298 (in Persian).
Ebrahimi A, Khodadakashi F, Mousavijahromi Y (2019). The Effect of Market Power Changes in the Banking Industry on Firms' Investment with Emphasis on Financial Constraints Channel. Quarterly Journal of Economic Growth and Development Research Vol. 9, No. 34 (Serial Number 34), March 2019 (59-76). Doi.org/10.30473/egdr.2018.5089. (in Persian).
Dimelis, S., Giotopoulos, I., & Louri, H. (2018, July). Banking Concentration and Firm Growth: The Impact of Size, Location and Financial Crisis. In International Conference on Applied Economics (pp. 63-72). Cham: Springer International Publishing. DOI: 10.1007/978-3-030-02194-8_5.
Ryan, R. M., O’Toole, C. M., & McCann, F. (2014). Does bank market power affect SME financing constraints?. Journal of Banking & Finance, 49, 495-505. DOI:10.1016/j.jbankfin.2013.12.024
Mishkin, F. S. (2013). How Should Central Banks Respond to Asset-Price Bubbles? The ‘Lean’versus ‘Clean’Debate After the GFC| Bulletin–June 2011. Bulletin, (June).
Bernanke, B. S., Gertler, M., & Gilchrist, S. (1999). The financial accelerator in a quantitative business cycle framework. Handbook of macroeconomics, 1, 1341-1393. doi.org/10.1016/S1574-0048(99)10034-X
Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The determinants and implications of corporate cash holdings. Journal of financial economics, 52(1), 3-46.
Gertler, M., Gilchrist, S., & Monetary Policy, B. C. (1994). the behaviour of Small 
Journal of Industrial Economics researches
Volume 9, Issue 32
December 2025
Pages 1-24

Files

History

  • Receive Date: 08 October 2025
  • Revise Date: 16 November 2025
  • Accept Date: 26 November 2025

Share

How to cite

Statistics