IDEAS home Printed from https://ideas.repec.org/a/hur/ijaraf/v3y2013i3p221-233.html
   My bibliography  Save this article

The Relationship between Product Market Competition and Capital Structure of the Selected Industries of the Tehran Stock Exchange

Author

Listed:
  • Mahmoud Moeinaddin

    () (Islamic Azad University)

  • Shahnaz Nayebzadeh

    () (Islamic Azad University)

  • Masoumeh Ghasemi

    () (Islamic Azad University)

Abstract

The main objective of this study is to examine the relationship between product market competition and capital structure of the selected industries on the Tehran Stock Exchange. Considering Tobin’s Q and Herfindahl-Hirschman index as the independent variable and the debt ratio as the dependent variable, the research model is developed. This is an applied study classified as the descriptive- correlation study. The sample covers 89 listed firms on the Tehran Stock Exchange during a period over 2007 to 2011. The collected data is analyzed by using multivariate regression executed in EVIEWS software. The findings reveal that there is a significant association between the capital structures of the selected industry and the product market competition. Additionally, applying Tobin’s Q and Herfindahl-Hirschman index as the indexes to measure the competitiveness in the product market does not document the significant relationship between product market competition and capital structure. The other findings, however, confirm the nonlinear relationship between Tobin’s Q and capital structure.

Suggested Citation

  • Mahmoud Moeinaddin & Shahnaz Nayebzadeh & Masoumeh Ghasemi, 2013. "The Relationship between Product Market Competition and Capital Structure of the Selected Industries of the 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. 3(3), pages 221-233, July.
  • Handle: RePEc:hur:ijaraf:v:3:y:2013:i:3:p:221-233
    as

    Download full text from publisher

    File URL: http://hrmars.com/hrmars_papers/Article_26_The_Relationship_between_Product_Market.pdf
    Download Restriction: no

    File URL: http://hrmars.com/hrmars_papers/Article_26_The_Relationship_between_Product_Market.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Kovenock, Dan & Phillips, Gordon M, 1997. "Capital Structure and Product Market Behavior: An Examination of Plant Exit and Investment Decisions," Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 767-803.
    2. James H. Scott Jr., 1976. "A Theory of Optimal Capital Structure," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 33-54, Spring.
    3. Brander, James A. & Lewis, Tracy R., 1986. "Oligopoly and Financial Structure: The Limited Liability Effect," American Economic Review, American Economic Association, vol. 76(5), pages 956-970, December.
    4. Rajan, Raghuram G & Zingales, Luigi, 1995. "What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-1460, December.
    5. Kee H. Chung & Stephen W. Pruitt, 1994. "A Simple Approximation of Tobin's q," Financial Management, Financial Management Association, vol. 23(3), Fall.
    6. Sumitra Naha & Malabika Roy, 2011. "Product Market Competition and Capital Structure of Firms: The Indian Evidence," Journal of Quantitative Economics, The Indian Econometric Society, vol. 9(2), pages 140-153, July.
    7. H M Bello & M Sepiriti & E M Letete, 2009. "Competition, Market Structure and Market Power in the Insurance Industry in Lesotho," The IUP Journal of Financial Economics, IUP Publications, vol. 0(1), pages 7-21, March.
    8. Lindenberg, Eric B & Ross, Stephen A, 1981. "Tobin's q Ratio and Industrial Organization," The Journal of Business, University of Chicago Press, vol. 54(1), pages 1-32, January.
    9. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    10. Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, vol. 43(1), pages 1-19, March.
    11. Harris, Milton & Raviv, Artur, 1991. "The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
    12. Titman, Sheridan, 1984. "The effect of capital structure on a firm's liquidation decision," Journal of Financial Economics, Elsevier, vol. 13(1), pages 137-151, March.
    13. Istaitieh, Abdulaziz & Rodriguez-Fernandez, Jose M., 2006. "Factor-product markets and firm's capital structure: A literature review," Review of Financial Economics, Elsevier, vol. 15(1), pages 49-75.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shujahat Haider Hashmi & Munawar Hussain & Raja Muhammad Ahsan Ilyas & Muhammad Asif Khan, 2017. "Sensitivity analysis for the determinants of investment appraisal," The Audit Financiar journal, Chamber of Financial Auditors of Romania, vol. 15(148), pages 686-686.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guney, Yilmaz & Li, Ling & Fairchild, Richard, 2011. "The relationship between product market competition and capital structure in Chinese listed firms," International Review of Financial Analysis, Elsevier, vol. 20(1), pages 41-51, January.
    2. Chen, Linda H. & Jiang, George J., 2001. "The financing behavior of Dutch firms," Research Report 01E54, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    3. Chen, Linda H. & Jiang, George J., 2001. "The determinants of Dutch capital structure choice," Research Report 01E55, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    4. Sultan Sikandar Mirza & Tanveer Ahsan & Raheel Safdar & Ajid Ur Rehman, 2020. "Competition, Debt Maturity, and Adjustment Speed in China: A Dynamic Fractional Estimation Approach," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 13(5), pages 1-17, May.
    5. Mitani, Hidetaka, 2014. "Capital structure and competitive position in product market," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 358-371.
    6. Xu, Jin, 2012. "Profitability and capital structure: Evidence from import penetration," Journal of Financial Economics, Elsevier, vol. 106(2), pages 427-446.
    7. Sumit K. Majumdar & Rabih Moussawi & Ulku Yaylacicegi, 2018. "Capital Structure and Mergers: Retrospective Evidence from a Natural Experiment," Journal of Industry, Competition and Trade, Springer, vol. 18(4), pages 449-472, December.
    8. Jianjun Miao, 2005. "Optimal Capital Structure and Industry Dynamics," Journal of Finance, American Finance Association, vol. 60(6), pages 2621-2659, December.
    9. Murray Z. Frank & Vidhan K. Goyal, 2009. "Capital Structure Decisions: Which Factors Are Reliably Important?," Financial Management, Financial Management Association International, vol. 38(1), pages 1-37, March.
    10. repec:dgr:rugsom:01e55 is not listed on IDEAS
    11. Maria Psillaki & Nikolaos Daskalakis, 2009. "Are the determinants of capital structure country or firm specific?," Small Business Economics, Springer, vol. 33(3), pages 319-333, October.
    12. Mihaela Brindusa TUDOSE, 2012. "Dimensions of the research on capital structure and firm performance," Anale. Seria Stiinte Economice. Timisoara, Faculty of Economics, Tibiscus University in Timisoara, vol. 0, pages 879-886, May.
    13. Majumdar, Sumit K., 2016. "Debt and communications technology diffusion: Retrospective evidence," Research Policy, Elsevier, vol. 45(2), pages 458-474.
    14. Lyandres, Evgeny, 2010. "Target leverage and the costs of issuing seasoned equity," Finance Research Letters, Elsevier, vol. 7(1), pages 39-52, March.
    15. Dobetz, Wolfgang & Grüninger, Matthias C., 2006. "Corporate cash holdings: Evidence from a different institutional setting," Working papers 2006/06, Faculty of Business and Economics - University of Basel.
    16. Hayam Wahba, 2014. "Capital structure, managerial ownership and firm performance: evidence from Egypt," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(4), pages 1041-1061, November.
    17. Antonczyk, Ron Christian & Salzmann, Astrid Juliane, 2014. "Overconfidence and optimism: The effect of national culture on capital structure," Research in International Business and Finance, Elsevier, vol. 31(C), pages 132-151.
    18. Agha Jahanzeb & Norkhairul Hafiz Bajuri & Aisha Ghori & David McMillan, 2015. "Market power versus capital structure determinants: Do they impact leverage?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 3(1), pages 1017948-101, December.
    19. Bayan M Arqawi & William J Bertin & Laurie Prather, 2014. "The impact of product warranties on the capital structure of Australian firms," Australian Journal of Management, Australian School of Business, vol. 39(2), pages 207-225, May.
    20. repec:dgr:rugsom:01e54 is not listed on IDEAS
    21. Li, Larry & Islam, Silvia Z., 2019. "Firm and industry specific determinants of capital structure: Evidence from the Australian market," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 425-437.
    22. Huang, Jialin & Rong, Zhao, 2017. "Housing boom, real estate diversification, and capital structure: Evidence from China," Emerging Markets Review, Elsevier, vol. 32(C), pages 74-95.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hur:ijaraf:v:3:y:2013:i:3:p:221-233. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Hassan Danial Aslam). General contact details of provider: http://hrmars.com/index.php/pages/detail/Accounting-Finance-Journal .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.