The Impact of Operating Cash Flows on Financial Leverage Adjustments in Firms listed on Tehran Stock Exchange (TSE)

Abstract

The aim of this paper is to study the impact of operating cash flows on financial leverage adjustments in firms listed on Tehran Stock Exchange. This research is applied in terms of objective and uses correlation as its research methodology. The statistic population includes firms listed on Tehran Stock Exchange (TSE), which have been chosen for a period of 9 years, since 2003 to 2012. The hypotheses have been tested using classified multivariate regression model. The results of research indicate that operating cash flow has a significant and negative impact on financial leverage adjustments and financial leverage, while it shows a significant and direct impact on speed of adjustment towards target. When there is a negative relationship between leverage and liquidly, firms with high liquidly assets prefer to provide cash for investments activities. The results also show that operating cash flow can help firms to reach target leverage and optimal capital structure.

Keywords

• Operating Cash Flow
• Financial leverage adjustments
• Financial Leverage
• Speed of adjustment