The Role of Competition and Corporate Governance on the Speed of Adjustment of Financial Leverage in the Capital Market

Jolanezhad, Fatemeh; BekhradiNasab, Vahid; ArabSalehi, Mahdi

doi:10.30473/indeco.2019.25229.1055

Document Type : applicative

Authors

¹ M.A in Accounting, Azad University

² M.A in Accounting, Isfahan University of Technology

³ Associate Professor, Department of Accounting, Isfahan University

https://doi.org/10.30473/indeco.2019.25229.1055

Abstract

The purpose of this study is to investigate the role of competition and corporate governance on the adjustment speedoffinancial leverage in the capital market. In this regard, a sample consisted of 175 firms listed on the Tehran Stock Exchange during the five-year period (2011-2015) were selected. The mentioned firms first based on the Herfindahl-Hirschman Index (HHI) were dividedinto two generalgroups (firms with high and lowcompetition. Afterward each of them, based on corporate governance index, was divided into two sub-groups (strong and weak corporate governance). Then,the adjustment speed offinancial leverage financial leverage was fitted in all four portfolios and the estimated results were compared. The multivariate regression analysis using panel data was used to test the hypothesis.The results indicatedthat the considered firms in all four portfoliosmoved toward leverages goals by different speeds. But, the cost of these adjustmentsdid not permit managers changedthe ratio of financial leverages, under competitioncondition. The lag ofthe adjustmentspeed of financial leverage and the lag of on time change in the financial leverageharmed management.Indeed, market competitionwas caused the management weakness problem was aggravated.

Keywords

20.1001.1.24767077.1397.2.3.6.4

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Journal of Industrial Economics researches

The Role of Competition and Corporate Governance on the Speed of Adjustment of Financial Leverage in the Capital Market

References

References

Volume 2, Issue 3 - Serial Number 3
March 2018
Pages 87-106

The Role of Competition and Corporate Governance on the Speed of Adjustment of Financial Leverage in the Capital Market

References

References

Volume 2, Issue 3 - Serial Number 3March 2018Pages 87-106

Volume 2, Issue 3 - Serial Number 3
March 2018
Pages 87-106