Firm’s Life Cycle, Capital Structure and Value of Firms Listed in Tehran Stock Exchange (TSE)

Abstract

Today, since markets are highly competitive, optimal arrangement of recourses seems important to preserve firm’s position and growth. This is so vital and unavoidable that capital structure of firms may directly affect firms’ value. To maximize utility, firms choose different economic policies during their life cycle. This research aims to answer the question that if life cycle can affect the relationship between capital structure and firm’s value, or not. The answer to the question could be of empirical issue. The period of the study is 1384 to 1389, and data takes 480 year/firm records. The results from statistical tests show that firm’s life cycle affects the relationship between capital structure and firm value, and that the effect is more considerable for growing firms than matured ones. In other words, the explanatory power of statistical study for the model viewed for the growing firms is more than that for the matured firms

Keywords

• : capital structure
• pecking order theory
• firm value
• firm life cycle