Abstract:
Previous studies suggest that capital structure plays a pivotal role in investment decisions. It is argued Compared to LSEs, that Small and Medium-Sized Enterprises(SMEs), in Iran face difficulty in Financing and obtaining bank loans, due to “size discrimination” and “ownership discrimination”. This study tests separately the determinants of Small and Medium Enterprise(SME) capital structure for the firms listed in Tehran stock exchange. Applying panel data analysis, our results obtained from small companies indicated a significant relationship between the profitability, growth and size of the company as the independent variable and the ratio of total debt as the dependent variable. Also in Iranian medium firms, there is a significant relationship between the profitability, ratio of fixed tangible assets and size of the company with debts of the company.
Machine summary:
The results obtained regarding small companies indicate a significant relationship between profitability, growth, and company size as independent variables and the total debt ratio as the dependent variable.
On the other hand, agency theory and tradeoff theory indicate a positive relationship between profitability and a company's financial leverage, but the pecking order theory has more applicability regarding small and medium-sized companies, because these companies, compared to large companies, face higher costs during financial financing through external sources (Kegway and Gray, 2010).
Another study is on the financial leverage ratio and the factors determining the capital structure of small and medium-sized enterprises in China, which was conducted by Keighley and Gray in 2010 for 269 companies over a 4-year period.
3-2- Internal Background To date, no domestic empirical research has been conducted regarding the determination of factors affecting the capital structure of Tehran Stock Exchange companies with a distinction between small and medium-sized companies.
The summary of the results presented in Tables 4 and 5 shows that there is no significant relationship between the effective tax rate and the capital structure of each of the small and medium-sized companies.
(1998), and is consistent with the research conducted by Kegway and Gray (2010), which pointed to the absence of a significant relationship between the effective tax rate and the capital structure of small and medium-sized companies.
The results presented in Tables 4 and 5 also show that there is no significant relationship between the operational risk of the company and the capital structure of small and medium-sized companies on the Tehran Stock Exchange.
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