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Investigating the Effects of Stable Profitability and Free Cash Flow on Stock Returns of Companies Listed in Tehran Stock Exchange

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  • Hamid Reza Vakilifard
  • Nassim Shahmoradi

Abstract

Given economical conditions being dominated in Iran and recent changes in domestic industries, the attention given by different groups, specifically by investors and financial analysts, to the status of enterprises and especially their efficiency has been multiplied. The managers, on the other hand, are also looking to improve their position in the competitive scene. The purpose of this study is to investigate the relationship between free cash flow, return on equity, and factors affecting it. A sample of 84 companies listed in Tehran Stock Exchange was selected through classified random sampling which were investigated for 8 years. Chow and Hausman test were used to specify the statistical methods; finally, results of the regression models indicated a strong relationship between free cash flow and return on equity. Although companies' stable or unstable profitability does not affect this relationship, it can adversely influence efficiency.

Suggested Citation

  • Hamid Reza Vakilifard & Nassim Shahmoradi, 2014. "Investigating the Effects of Stable Profitability and Free Cash Flow on Stock Returns of Companies Listed in Tehran Stock Exchange," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(3), pages 21-27, July.
    • Handle: RePEc:hur:ijaraf:v:4:y:2014:i:3:p:21-27
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    References listed on IDEAS

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