Keywords: Abnormal returns, capital structure, financial flexibility, financial leverage, marginal value of cash

Transcription

1 Research Journal of Applied Sciences Engineering and Technology 5(14): ISSN: ; e-issn: axwell Scienific Organizaion 213 Submied: Ocober Acceped: December Published: April ` The Relaionship beween Financial Flexibiliy and Capial Srucure Decisions 1 Roya Darab 2 Salah ohamad 3 Ahmad GHasemi and 3 Shanaz Forozan 1 Souh Tehran Branch Islamic Azad Universiy 2 Deparmen of Accouning arivan Branch Islamic Azad Universiy 3 Deparmen of Accouning Souh Tehran Branch Islamic Azad Universiy Tehran Iran Absrac: aking decisions abou capial srucure is one of he mos challenging and problemaic issues companies face and hereby i is he mos crucial decisions companies have o make for heir survival. The aim of his sudy was o invesigae he relaionship beween financial flexibiliy and capial srucure decisions in acceped companies in Tehran Sock Exchange wih using Falkner and Wang odel. Resuls of esing hypohesis which are based on a sample- ha is consised of 82 firms for a period of five years from 26 o 211- using mulivariae linear regression models as well as panel daa mehod implied ha marginal value of cash is negaive in erms of marke i.e. he marke is no willing o raise funds and will no evaluae his increase o be posiive in funds. Furhermore findings represen ha here is no significan relaionship beween marginal value of financial flexibiliy and capial srucure decisions of firms and firms would no pay aenion o financial flexibiliy level in heir decisions regarding increasing or decreasing debs which in long erm would resul in loosing financial flexibiliy as well as profiable invesmen opporuniies. Keywords: Abnormal reurns capial srucure financial flexibiliy financial leverage marginal value of cash INTRODUCTION Today as firms become bigger and bigger and echnology develops here will be increasing need for financial sources as well as large capial sources which as a resul lead o he fac ha capial budgeing and financing decisions of he firms will be subjeced o one of main areas of decision which financial managers of public sock firms had o make. Theoreical discussions abou capial srucure pursui reaching a balance beween wo major sources of financial sources i.e. deb and capial equiy righs in order o increase firms shareholder value a ha poin o a maximum value and in conras decrease financing coss o a minimum value. Such poin (balance) is called an opimal capial srucure. Improper capial srucure would affec all fields of aciviies associaed wih a firm and could lead o emergence of problems like increasing firm s capial cos decreasing firm s value increasing firm s risk aking and finally eniy insolvency. The goal of all firms is o maximize is value. Capial srucure has a more limied concep han financial srucure. Financial srucure refers o how a firm s equiy is provided while capial srucure refers o he combinaion of long erm financial resources. Accordingly a firm s capial srucure is a par of is Financial srucure (yers 1984b). Several facors affec on he capial srucure decisions. The firs facor is he commercial risk or equiies- relaed risk value when deb is no used. The higher he commercial risk he lower he opimal deb raio. The second key facor is he financial saus of a firm. The mos imporan use of deb is o be accepable for he inisry of Economy and Finance which reduce effecive cos of deb. The hird one is financial flexibiliy (Clarc 21). Financial flexibiliy refers o he abiliy of a business eniy o adop effecive measures o change he amoun and ime of cash flow in a way ha enable he eniy o respond o unexpeced evens and opporuniies. On he oher hand anoher subjec which is relaed ypically o firms capial srucure is financial flexibiliy. Financial flexibiliy is a degree of a firm s capaciy which would enable firm o mobilize resources for response aciviies in order o increase firm s value o a maximum value (Byoun 27). Problems of capial marke made firms o mainain financial flexibiliy for purpose of using profiable opporuniies. In fac financial flexibiliy is commercial insiuion s capabiliy o mobilize heir financial resources agains uncerain condiions in fuure. A commercial firm needs financial flexibiliy in pracice when expecaions had no me or unexpeced occurrences had occurred (Byoun 211). In his regard his sudy aemped o invesigae he relaionship beween financial flexibiliy and leverage raio of firms lised in Tehran Sock Exchange and also how impac of capial srucure of acive firms Corresponding Auhor: Roya Darab Souh Tehran Branch Islamic Azad Universiy Tehran Iran 3843

2 in marke is defined by financial flexibiliy. Low mainenance of cash and high leverage raio of Iranian firms make double he necessiy of aking ino accoun financial flexibiliy capial srucure decisions and relaionship beween hese wo. oreover regarding various opinions and heories researchers provided in conex of financing mehods-even someimes hey had breached each oher s heories- his sudy is imporan invesigaing his issue and is obained resuls lead o exend and resolve conflics seen beween various heories and previous opinions. The main objecive of he presen sudy is o sudy he relaionship beween financial flexibiliy and capial srucures decisions of he firms lised in Tehran Sock Exchange. To achieve he goal firs he relaionship beween he final value of cash and abnormal sock reurn of firms has been focused upon. Is effec ype and how abnormal sock reurn affecs on he final value of cash was esed by Faulkender and Wang (26). THEORETICAL LITERATURE OF THE RESEARCH Choosing opimal capial srucure and various financing mehods is he main concern of firms financial managers. Inadequae capial srucure in each firm paricularly in small firms will affec various conexs of firms aciviies and can lead o emergence of issues like inefficiency in produc markeing lack of efficiency of firms and failure o use proper human resources and similar cases in his regard. Financing decisions is one of imporan asks of firms in defining he bes capial srucure composiion. Recogniion and valuaion of companies based on asses as well as how o finance depends on recogniion of capial srucure (odigliani and iller 1963). iller and odiliani (1958) by presening some heories expressed ha under paricular hypohesisincluding exisence of perfec compeiive marke no income axes no bankrupcy coss no agency coss and informaion asymmery beween acive marke paricipans and replacemen of inernal or exernal financial sources- managers canno modify firm s value jus by modifying financial source composiion. In oher words firm s value is independen of capial sources. This heory which is known as he firs heory of iller and odilian expressed ha assuming no income axes value of a firm in deb (leveraged) is equal o value of a firm no in deb (non-leveraged). Sco and arin (1979) (quoed by Sibilco) in a research ha hey performed in capial srucure conex in USA concluded ha ype of indusry is an effecive and deermining facor in firms financial srucure. In oher research done by yres and ajluf (1984) (quoed by Sibilco) deermining facors of capial srucure regarding informaion asymmery hypohesis Res. J. Appl. Sci. Eng. Technol. 5(14): perspecive were defined. In his research which corresponded wih independen research of yers in he same year i was claimed ha in case of exisence of informaion asymmery beween firms and capial marke profiable firms preferred o use inernal financing sources over exernal ones. Bu if hey needed more resources a firs hey end o borrow more resources and finally (or afer ha) hey ry o offer equiy. Warner (1977) in a research performed on a sample of railway companies deb influence on increasing firms value was confirmed. Anoher one of hese fundamenal researches include join research performed by Timan and Wessels (1988) which is known as one invesigaing deermining facors of capial srucure in which he mos imporan deermining facors of capial srucureincluding ax advanages oher han deb company developmen exclusiveness of company producs ype of indusry profi flucuaions and profiabiliy of company- were sudied. Research resul was ha deb raio o firm s capial had negaive relaionship wih exclusiveness of company producs. oreover shor erm deb of firm had negaive relaionship wih size of firm. In his research no significan relaionship beween ax advanages oher han deb profi flucuaions collaeral value of asses and fuure growh of he company were found. Anderson (199) invesigaed he relaionship beween firms capial srucure and heir echnology and concluded ha capial-inensive firms had higher debs compared o work-inensive firms. The mos comprehensive and prominen research associaed wih capial srucure is performed by Rajan and Zingales (1995) which is called wha do we know abou capial srucure? Obained resuls of his research showed ha financial leverage in each one of hese counries had negaive relaionship wih wo facors of marke value raio o office value and firm s profiabiliy had posiive relaionship wih wo facors of eminen fixed asses and size of firm. Thereby wih some connivance i can be said ha facors associaed wih capial srucure paern in hese seven counries excep Germany could be expressed as general ones in erm of capial srucure. Fama and French (25) performed a research called represened paerns by parallel and preferred heory abou dividends and deb in USA Populaion consised of USA firms during period of 1965 o In his research financing and welfare firms were excluded from he sample. Obained resuls of research showed ha: by conrolling variable of invesmen opporuniies firms which paid higher dividends had lower leverage raio o office value. Furhermore by conrolling profiabiliy variable of firms which had higher curren and expeced invesmen hese would pay higher dividends. oreover according o simple

3 model of his heory firms which had higher invesmen had higher leverage raio o office value; finally according o complex model of his heory when firms made a balance beween curren financing and expeced one in fuure. Firms which face higher ne cash flow flucuaions pay lower dividends and mainain lower leverage. Firms (paricularly firms which pay dividends) had lower shor erm leverage by higher expeced invesmen. Relaionship beween leverage and paid dividends raio is also negaive (yers and ajluf 1984a). archica and ura (27) had done researches abou he relaionship beween financial flexibiliy and invesmen decisions. They concluded ha here is a srong relaionship beween financial flexibiliy and invesmen. In oher words afer a period of low leverage policy firms which had financial flexibiliy had more poenial (capabiliy) o perform capial coss (archica and ura 27). Byoun (28a b) conduced a research in USA which is called how and when firms would modify heir capial srucure oward defined objecives? Populaion in his research consised of all USA firms during period of 1971 o 23 in which following previous sudies financing and welfare firms were excluded from he sample. Resuls showed ha mos of changes in capial srucure occur when firms have cash surplus and heir level of deb is higher han defined deb capaciy or when firms have cash defici and heir level of deb is lower han defined deb capaciy. Then pace of hese changes is reduced. oreover pace of changes in firms-which have cash surplus and heir level of deb is higher han defined deb capaciy-was higher han one which have cash defici and heir level of deb is lower han defined deb capaciy. This higher pace of changes could be due o he fac ha coss associaed wih changes because of reduced deb is lower han defined deb capaciy. Byoun concluded ha firms which have lower deb raio o defined deb capaciy would use deb for financing in conras o firms which have higher deb raio o defined deb capaciy. Byoun invesigaed he relaionship beween financial flexibiliy and firms capial srucure and used seps associaed wih firms lifeime as an alernaive for defining financial flexibiliy. Resuls of his research showed ha new companies-new-emerged companies which had newly begun o develop and make profi-offer equiy shares for financing and mainain smaller leverage. Growing companies-which had already began o grow and develop- us deb for financing and mainained larger leverage. Immaure companies use inernal sources and mainained a balanced leverage. RESEARCH HYPOTHESIS Based on he heoreical lieraure and he conduced sudies research hypoheses were developed Res. J. Appl. Sci. Eng. Technol. 5(14): as follows. The presen sudy has hree primary hypoheses. H1 : There is a significan relaionship beween marginal cash value and abnormal reurns of shareholders H2 : There is a significan relaionship beween flexibiliy final value and leverage raio H3 : There is a significan relaionship beween flexibiliy final value and firms capial srucure decisions. ATERIALS AND ETHODS In his research correlaion analysis mehod was used o es hypoheses. Populaion in his research consised of all firms ha had been lised in Tehran Exchange Sock and been acive during period of 26 o 211. Screening mehod (eliminaion mehod) had been used in order o selec a sample which would ac as a proper represenaive of he populaion. For his reason 5 crieria were considered. If a company had esablished all crieria i would be seleced as research sample. Firm should have been lised in Tehran Exchange Sock and be acive ill end of in 211 Exchange Sock Firm should have no changed (is) financial year during period of 26 o 211 Firm should have coninuous aciviy and a leas have 8 conracs each year Firm should no be among invesing or financial inermediaion companies Afer considering all above-menioned crieria 82 firms remained as he screened populaion. All of hem were seleced as sample of research. Therefore our observaion included 41 years-firms ha were classified in 22 indusrial formas. Daa collecion mehod: Research required daa for esing hypoheses were colleced hrough referring o audied financial saemens of firms -which had been lised in Tehran Exchange Sock- (available in Tehran Exchange Sock library) as well as Tadbir Pardaz sofware (conaining informaion of firms lised in Tehran Exchange Sock including financial saemens price various indexes and ec.). Differen ools were used o collec daa including saisical ess informaion daabases Eviews sofware and Excel sofware. Informaion associaed wih heoreical research principle were also colleced hroughou libraries using books Persian and Lain aricles. Research variables: According o following inroduced model independen variables included: marke response o cash changes ( C / -1 ) and

4 Res. J. Appl. Sci. Eng. Technol. 5(14): marginal cash value (voc); dependen variable included: abnormal reurns of shareholders (r ) leverage raio (L ). In his research Faulkender and Wang (26) model were used for esing hypoheses which is defined as follows (Faulkender and Wang 26). odel (1): 1 = β 1 2 * 1 1 r RD β 6 1 C I 7 1 C D 8 1 C C E NA 3L C 1 NF 9 1 L 11 ε RD is changes in research and developmen coss. If financial saemen was no repored RD would be considered o. I is changes in ineres coss and is calculaed he same as above-menioned variables i.e. difference beween ineres coss of curren year and preceden year. D i. is overall changes in company dividends. NF i. is overall firm s financing ha is calculaed as follows: ( Deb i Equiy ) NF = In coninuaion wih use of he model proposed by Clark (21) and oupus of Faulkender and Wang s model (26) final value of financial flexibiliy will be calculaed (Clark 21). odel (2): 1 VOC FW = β 1 2 3L i. 1 C Afer he calculaion of he final value of financial flexibiliy he relaionship beween he final value of financial flexibiliy and leverage raio and he exen of he effec of he final value of financial flexibiliy on he capial srucure decisions of he firms are analyzed by he following regression model. odel (3): CF Dep i i i i L i = α 1 2B 3 4Size 5 6 7VOC TA ε r = Cumulaive abnormal reurns of firm L = Firm s leverage raio which is calculaed as follows: L = Toal Deb Toal Asses C is changes in cash and shor-erm invesmen of firm in curren year compared o previous year. I is obained by difference beween changes in cash and shor-erm invesmen of curren year and changes in cash and shor-erm invesmen of preceden year. -1 is marke value a he beginning of research. I is obained by muliplying equiy number o price a he beginning of each firm period. E is changes in profi before firm s ineres and ax. In fac i is obained by difference beween profi before ineres and ax (EBIT) of curren year and profi before ineres and ax of preceden year. NA is changes in all asses excep shor erm cash and invesmen and is calculaed as follows: NAi = ( Toal Asses Cash markeable Securiies ) ( Toal Asses Cash markeable Securiies ) 1 1 FA RD Equiy in above erm is overall capial; i is no shareholder s righs. CFR R= Firm s cash flow ha is obained from firm s cash flow saemen TARR = Overall firm s asses SizeR R= Firm s depreciaion expense FAR R= Overall fixed asses of firm RDR R= Firm s research and developmen cos in curren year Analysis mehod: In his research mulivariae correlaion mehod was used for analyzing informaion and esing hypoheses. Saisical mehod used here is panel daa mehod. For esing hypoheses a firs bound F-es were used o es accuracy of daa inegraion and hen es mehod ype (fixed effecs or random effecs) were defined based on resuls of Husman es. odel esimaion was done according o mehod ype. F saisics were used in order o es significance of overall model and saisics were used in order o es significance independen variables coefficien in each model. Acceping or rejecing hypohesis was decided in 95% confidence level. oreover Jarq-Bara es Pagan-Broush es and d saisics of Durbin-Wason were used respecively in order o es normaliy of variables equivalency of errors variance and errors independence. EPIRICAL RESULTS Resul of research s firs hypohesis: The aim of esing research s firs hypohesis was o sudy ha wheher here is a significan relaionship beween marginal value of cash and abnormal capial reurns or no? And is saisic hypohesis is defined as follows: HR R: There is no significan relaionship beween marginal value of cash and abnormal capial reurns HR1 R: There is a significan relaionship beween marginal value of cash and abnormal capial reurns

5 Table 1: Resuls of Chave es for model (1) Tes Saisics Saisics value Degree of freedom p-value Chave F (81.318). Table 2: Resuls of Hussman es for model (1) Tes Saisics Saisics value Degree of freedom p-value Hussman X Table 3: Firs hypohesis es resuls using one-way fixed effecs Dependen variable: r number of observaions: 41 years-firm Variable Coefficien -saisics p-value Relaionship C No significance C / Negaive C -1 / Posiive * C / -1 L C / No significance E / Posiive NA / No significance I / Negaive D / No significance C -1 / posiive L No significance NF / No significance odel deermining coefficen.3863 F-saisics This hypohesis was esimaed as Panel daa using model (1). If β 1 coefficien was siginifican in 95% confidence level hen i would be approved/confirmed. C C C C E = β 3Li I Di C 1 NFi β Li 1 ε H : β1 = H1 : β1 1 ri 1 2 * 1 1 Res. J. Appl. Sci. Eng. Technol. 5(14): NAi 5 1 (1) Selecing paern for research s firs model: Cahve es or bound - es were used in order o deermine wheher using panel daa mehod -o esimae considered model- is efficien or no. In his es H represen equaliy of inerceps and if i is rejeced using panel daa mehod is approved and Panel daa mehod can be used. Obained resuls are presened in Table 1. H hypohesis is rejeced in 95% confidence level according o resuls of es and is p-value (.). Therefore panel daa mehod can be used. oreover Husman es was used in order o deermine which mehod (fixed effecs or random effecs) is more appropriae for model esimaion (deermining fixed or random secional unis differences). In his es H hypohesis represens ha here is no relaionship beween disrupion of he inercep and he explanaory variables i.e. hey are independen. In Hussman es if H es would be rejeced fixed effecs mehod would be used and if H would be acceped random effecs mehod would be 3847 used. Obained resuls of his es are presened in Table 2. According o es resuls and is p-value (.) - which is lower han.5- H hypohesis is rejeced in 95% confidence level and H 1 hypohesis is acceped. According o resuls of Chave and Hussman es and also resuls of hypohesis esing of classic regression saisic model 1 is esimaed as fixed effecs using panel daa mehod. Final resuls of model esimaion are provided in Table 3. According o resuls presened in Table 3 since saisics probabiliy for coefficien variable of cash change ( C / -1 ) is lower han.5 i.e. i is.4 hen as a resul a significan relaionship beween cash marginal value (final flexibiliy value) and abnormal capial reurn in 95% confidence level would be approved and research firs hypohesis would be acceped. Negaive naure of variable coefficien (-.9482) implies a reverse relaionship beween cash marginal value and abnormal capial reurns i.e. increasing capial marginal value ( C / -1 ) o 1 Rails would decrease abnormal reurn level o Above finding is in conras wih resuls presened by Clark (21) -which was done in USA capial marke i.e. according o experimenal resuls presened by him relaionship beween cash marginal value and abnormal capial reurn of USA firms was posiive and significan. One reason for his conras migh be associaed wih erms of inflaion and low ineres raes of Iranian banks. Resuls of esing second research hypohesis: The aim of esing second research hypohesis was o invesigae wheher here is a significan relaionship beween flexibiliy final value and leverage raio or no. Saisic hypohesis is defined as follows: H : There is no significan relaionship beween flexibiliy final value and leverage raio. H 1 : There is a significan relaionship beween flexibiliy final value and leverage raio. For esing his hypohesis a firs flexibiliy final value is calculaed using model 2 as well as resuls obained from model 1 esimaion as follows: C VOC = β L (2) FW β 3 i. 1 Afer calculaing flexibiliy final value flexibiliy final value would be inroduced in model 3 same as follows and would be esimaed as panel daa using linear regression mehod. In his model if α 6 was significan in 95% confid nce level second research hypohesis would be approved. i

6 Res. J. Appl. Sci. Eng. Technol. 5(14): Table 4: Chave es resuls for model 3 Tes Saisics Saisics value Degree of freedom p-value Chave F 7.95 (81 322). Table 5: resuls of Hussman es for model 3 Tes Saisics Saisics value Degree of freedom p-value Hussman X Table 6: Second hypohesis es resuls using one-way fixed effecs mehod Dependen variable: L no of observaions: 328 year-firm Variable Coefficien -saisics p-value Relaionship C No significance CF /TA negaive B No significance Dep /TA No significance Size Posiive FA /TA No significance VOC No significance AR (1) Posiive CF Dep i i i L i = α 1 2B 3 4Size 5 6VOC TA ε H H 1 : α = 6 : α 6 FA (3) Selecing paern for second research model: Bound F-es or Chave es were used in order o deermine wheher using panel daa mehod would be effecive or no. In his es H shows equaliy of inerceps. If H would be rejeced using panel daa mehod would be approved. Resuls of his es are provided in Table 4. According o es resuls and is p-value (.) H hypohesis is rejeced in 95% confidence level and panel daa mehod could be used. oreover Hussman es is used in order o deermine which mehod (fixed effecs or random effecs) is more appropriae (useful) for esimaion (deermining fixed or random differences of secional unis). In his es H shows ha here is no relaionship beween disrupion componen of inercep and explanaory variables and acually hese are independen. In Hussman es if H hypohesis would be rejeced fixed effecs would be used and on he oher hand if H hypohesis would be acceped random effecs would be used. Obained resuls of his es are presened in Table 5. According o es resuls and is p-value (.18) which is lower han.5 H hypohesis is rejeced in 95% confidence level and H 1 hypohesis is acceped. According o es resuls of Chave and Hussman es and also es resuls of saisic hypohesis of classic regression research model (3) is esimaed as fixed effecs using panel daa mehod afer inroducing AR self-correlaed firs order variable o model (in order o resolve problem of non-independence of remains). Final resuls of model esimaion are presened in Table According o presened resuls in Table 1 and 2 since saisics probabiliy for variable coefficien of final flexibiliy value (VOC ) is higher han.5 (.3573) as a resul a significan relaionship beween final flexibiliy value and leverage raio is rejeced in 95% confidence level and second research hypohesis will no be approved. Therefore i can be said ha here is no significan relaionship beween final flexibiliy value and leverage raio in 95% confidence level and second research hypohesis will no be approved. Above finding does no mach wih resuls presened by Clark (21) in USA sock marke. Tes resuls of hird research hypohesis: The aim of esing hird research hypohesis was o invesigae wheher final flexibiliy value has higher effec on firms capial srucure decisions or no? And is saisic is defined as follows: H : Flexibiliy value has no greaes impac on firms capial srucure decisions H 1 : Flexibiliy value has he greaes impac on firms capial srucure decisions. In order o es hird hypohesis model 3 is esed wihou presence of final flexibiliy value (model 4) for he firs ime and i is esed wih presence of final flexibiliy value (model 5) for he second ime and deermining coefficien of models will be compared. If deermining coefficien level of models would be increased by inroducing final flexibiliy value hird research hypohesis would be approved. CF Dep i i i L i = α 1 2B 3 4Size 5 TA ε L i = α 6VOC ε FA (4) (5)

7 Res. J. Appl. Sci. Eng. Technol. 5(14): Table 7: Resuls of Chave and Hussman es for model (4) Tes Saisics Saisics value Degree of freedom p-value Chave F (81.323). Hussman X Table 8: Tes resuls of model (4) using one-way fixed effecs Dependen variable: L i. No of observaion: 328 year-firm Variable Coefficien -saisics p-value Relaionship C No relaionship CF /TA Negaive B No relaionship Dep /TA No relaionship Size posiive FA /TA No relaionship AR (1) Posiive odel deermining coefficien.949 F-saisics (P-value) (.) Table 9: Tes resuls of model (5) using one-way fixed effecs mehod Dependen variable: L No of observaions: 328 year-firm Variable Coefficien -saisics p-value Relaionship C Posiive VOC No significance AR (1) Posiive odel deermining coefficien.894 F-saisics (p-value) (.) Selecing paern for research model (4): Obained resuls of Hussman and Chave es is presened in Table 7 for selecing paern. According o resuls of Chave es and is p-value H hypohesis will be rejeced in 95% confidence level and panel daa mehod can be used. oreover according o resuls of Hussman es and is p-value (.21) which is lower han.5 H hypohesis will be rejeced in 95% confidence level. Therefore i is necessary o esimae model using fixed effec. Selecing paern for research model (5): Resuls of Chave and Hussman es is presened in Table 7 for selecing paern. According o Chave es resuls and is p-value (.) H hypohesis is rejeced in 95% confidence level and panel daa mehod can be used. oreover according o Hussman es resuls and is p-value (.122) which is lower han.5 H hypohesis will be rejeced in 95% confidence level and H 1 hypohesis will be acceped. Therefore i is necessary o esimae model using fixed effecs mehod. According o resuls of Chave and Hussman ess as well as es resuls of classic regression saisic hypohesis research model (4) is esimaed as fixed effecs using panel daa mehod afer inroducing AR self-correlaed firs order variable o model (in order o resolve problem of non-independence of remains). Deermining coefficien of model shows ha 9.54% of changes in leverage raio are defined by independen variables inroduced in model (Table 8) According o resuls of Chave and Hussman ess as well as es resul of classic regression saisical hypohesis research model (5) is esimaed as fixed effecs using panel daa mehod afer inroducing AR 3849 self-correlaed firs order variable o model (for resolving problem of non-independence of remains). Final resuls of model esimaion are presened in Table 9. odel (5) deermining coefficien shows ha 89.4% of changes in leverage raio are defined by independen variables inroduced in model. According o presened resuls in 8-1 and 9-1 ables as well as lower naure of deermining coefficien of model 5 (89.4) compared o model 4 (9.49) i can be concluded ha effecs of final flexibiliy resuls on firms capial srucure decisions is lower han one expeced. Therefore hird hypohesis is rejeced. Above finding does no mach wih resuls presened by Clark (21) in USA sock marke. DISCUSSION AND CONCLUSION Obained resuls of esing hypohesis are presened in Table 1. Research s resuls show ha: Cash marginal value which is negaive hrough marke response in abnormal reurn forma compared o measured cash changes. Tha is o say marke would decrease.9482% firm s reurn per 1 Rials increase in firm s cash. This fac shows ha marke has no endency o increase cash and will no evaluae increasing cash There is a negaive relaionship beween financial flexibiliy and deb raio bu his relaionship is no significan saisically and hypohesis -which is

8 Res. J. Appl. Sci. Eng. Technol. 5(14): Table 1: Summary of es resuls of research hypohesis Hypohesis Descripion Conclusion H1 There is a significan relaionship beween cash marginal value and shareholders abnormal reurn Acceped H2 There is a significan relaionship beween final flexibiliy value and leverage raio Rejeced H3 There is a significan relaionship beween final flexibiliy value and firms capial srucure decision Rejeced associaed wih his problem- is no acceped oo. Above finding shows ha here is no relaionship beween firms capial srucure decisions and firms financial flexibiliy. In Iran firms do no ake ino accoun flexibiliy level when hey make decisions abou increasing or decreasing heir debs. This issue in long erm would lead o loosing inflexibiliy as well as profiable invesmen opporuniies and ensuring fuure profiabiliy Cash changes variables office value raio o marke value cos of depreciaion firm s size amoun of fixed asses regardless of final flexibiliy value have he greaes impac on capial srucure because heir deermining coefficien are more han he a model in which only financial flexibiliy is inroduced. Therefore i can be said ha final flexibiliy value has no effec on firms capial srucure. Resuls of his research do no correspond wih experimenal findings presened by Faulkender and Wang (26) archica and ura (27) Byoun (28a) and Clark (21). One reason for his difference beween resuls of his research and oher researches done abroad is ha inflaion rae is oo low in abroad. Thereby cos of losing invesmen opporuniies in hese counries is low i.e. if firms keep cash in firms hey will no undergo losses associaed wih keeping cash and monasery asses due o low inflaion rae bu insead hey have financial flexibiliy. This financial flexibiliy is valuable because of profiable invesmen opporuniies. For his reason in abroad or-i is beer o say ha- in counries wih low inflaion rae here is a posiive relaionship beween cash changes and abnormal reurn bu surprisingly i is negaive in Iran. Tha is o say in Iran here is losses associaed wih keeping moneary asses due o high inflammaion rae and keeping cash and also cos of losing opporuniies is high i.e. if asses will be kep as cash or be deposied firm would also undergo loss because in Iran inflammaion is higher han ineres raes on bank deposis. This loss is no hidden from invesors perspecive hereby his relaionship is negaive. oreover here is no significan relaionship beween final financial value and leverage raio in Iran sock marke in conras o oher financial markes is due o borrow srucure in Iran as well as no regard o firms flexibiliy by banks during graning faciliies. This issue led o he reason why firms managers do no ake ino accoun flexibiliy when making decisions on capial srucure. 385 REFERENCES Anderson G An empirical noe on he independence of he echnology and financial srucure. Canadian J. Econ. 23(3): Byoun S. 27. Financial flexibiliy Leverage and firm size. Rerieved from: finance.baylor. edu/ seminars/papers/flexibiliy_fma272.pdf. Byoun S. 28a. Financial Flexibiliy and Capial Srucure Decision. Working Paper Universiy of Baylor. Rerieved from: search/ down.php?r_code=112&num=177. Byoun S. 28b. How and when do firms adjus heir capial srucures oward arges? J. Financ. 63: Byoun S Financial Flexibiliy and Capial Srucure Decision. Working Paper Universiy of Baylor pp: 1-5. Rerieved from: search/down.php?r_code=112&num=177. Clark B.J. 21. The Impac of Financial Flexibiliy on Capial Srucure Decision: Some Empirical Evidence. Rerieved from: papers.ssrn.com/ sol3/ papers.cfm?absrac_id= Fama E.F. and K.R. French 25. Financing decisions: Who issues sock. J. Financ. Econ. 76(25): Faulkender. and R. Wang 26. Corporae financial policy and he value of cash. J. Financ. LXI(4): archica. and R. ura 27. Financial Flexibiliy and Invesmen Decisions. Rerieved from: SSRN hp://ssrn. com/absrac iller. and F. odiglian The cos of capial corporaion finance and he heory of invesmen. Am. Econ. Rev. 48(3): odiglian F. and. iller Corporae income axes and he cos of capial: A correcion. Am. Econ. Rev. 53: yers S.C. 1984b. The capial srucure puzzle. J. Financ. 39: yers S.C. and N.S. ajluf 1984a. Corporae financing and invesmen decisions when firms have informaion hose invesors do no have. J. Financ. Econ. 13(2): Rajan R.G. and L. Zingales Wha do we know abou capial srucure? Some evidence from inernaional daa. J. Financ. 5: Sco D. and J. arin Evidence on he imporan of financial srucure. Financ. anag. 4(1): Timan S. and R. Wessels The deerminans of capial srucure choice. J. Financ. 43: Warner G The fail cos: Evidence. J. Financ. 32: