ACADEMIE ROYALE DES SCIENCES D OUTRE-MER BULLETIN DES SEANCES
Vol. 4 No. 4 July 2015 pp. 73-82
ISSN: 0001-4176
Investigation of operating liability leverage on future return of stockholders’ rights in
companies accredited by Tehran stocks exchange
1
Sedigheh Tootian Esfahani, 2Mahdi Yasur
1
Ph.D Assistant professor of Department of Accounting, College of Humanities, Tehran East Branch, Islamic
Azad University, Tehran, Iran.
2
MA student of Accounting, College of Humanities, Damghan Branch, Islamic Azad University, Damghan,
Iran
Abstract: Companies provide their investment expenses and their own operation through
financing from different sources. Selection of the best method of financing is the responsibility of
financial managers. This can be done through liabilities or distribution of stocks. In the present
study, operational liabilities as a crucial means of financing were investigated in terms of their
future return in 110 stockholder companies confirmed by Tehran Stock Exchange during 2008 to
2013. Methodology was a descriptive one based on regression analysis through compound data.
Findings showed that there was significant relationship between operating liability leverage,
Contractual Operating liability leverage and future return of companies’ stockholders. Further,
overall lever leads to a balance between lever of operational liability and future return of
shareholders. Besides filling the gap in this field, implications of the study would be efficient for
managers and investors too.
Key words: Operating liability leverage Stock exchange Future return of shareholders


liabilities are operational. The latter include those such
as payment accounts, payment expenses and retirement
liabilities which are formed as a result of transaction
with providers, customers and employees. It is obvious
that method of financing can have effects on accounting
interest and, subsequently, on expected return in
inefficient markets.
Awareness of effects of financing on companies’ stock
return is very necessary for beneficiary people since, in
one hand, it helps managers in fulfilling their
responsibilities such as decision making about method
of financing and maximization of companies’ values
which every company’s goal. On the other hand, it
facilitates the process of decision making for investors
and shareholders (Arab, 2007).
Richardson and Scott (2003) carried out a study with
the title of ‘the relationship between external financing
and stock’s future return’ and investigated all external
financing methods; they found out that there is a
negative relationship between external financing
changes and the expected stock return. Finally, they
concluded that future return of stocks is greatly
dependent on investment structure.
INTRODUCTION
Main goals of managers and companies are
maximization of shareholders’ money and profit and
fulfilling moralities and social responsibilities. An
important influential factor on the above goals is
financing. Deciding about liabilities and shareholders’
rights, financial management defines financial
resources and employs their long-term properties and
investment (Razaghi, 2007).
In this sense, liabilities are an indispensable part of
many companies and has crucial role in companies’
financing. In financial structure of every company,
liabilities cause increase of accounting profit and
increase of profit rate. On the other hand, it leads to
increase of financial risk, decrease of stock prices and
subsequently decrease of stock return and this happens
as a result of interest and lack of fulfillment of financial
liabilities. Financing through liabilities has many forms.
Some of these forms include: accounts and payment
documents, payment expenses, different types of loans
and bonds. Some liabilities such as bank loans and
bonds are considered financial while some other
Corresponding Author: Mahdi Yasur
73
Nissim and penman (2003) analyzed the effect of
financing, liabilities and total effects against benefiting.
They also worked out the P/B ratio and concluded that
effect of liabilities occurring as a result of operation is
stronger than benefiting and P/B ratio.
Moreover, Todd and Egtern (2003) made a study on
efficiency of inflation, investment and economy as
internal resources. They categorized companies into
two groups: the first included those companies that
reduce sensitivity of data in financial markets as a result
of accumulated interest; the second group of companies
are those who employ the obtained interest in stock
interest, current investment, and use it as financing
resource. They concluded that using internal resources
leads to increase of financial markets reduce of level of
efficiency and total return.
Compello (2005) analyzed financing through borrowing
in America. The research question was whether
financing through borrowing would promote or reduce
sales of small or average sized economic corporation?
He analyzed data collected from 15 industrial centers to
figure out the inter-industrial relationship between the
proportion of liability to property and sales. He
concluded that mediation in borrowing is associated
with profit. In this regard, extravagancy leads to a type
of sale which is doomed to failure.
Moreover, Driffield et al. (2005) carried out a study
investigating whether external financing has fewer
returns in four western countries of Malaysia,
Indonesia, Korea and Thailand. They concluded that all
returns of external and internal resources of financing
are not well organized. To compensate for that, they
suggested a model to explore random effects. It was
revealed that return means of all external financing
options are homogeneous and that return of long-term
liabilities is more than short-term ones.
Shaw et al. (2006) explored the relationship between
outer-organizational financing activities and future
profiting. The two above methods focused on
evaluation of net liquidity values in financing activities,
use of liquidity transactions and different types of
financing methods (liability or investment). Also,
besides return and benefit of companies, they
considered prediction of profit in long-term and shortterm periods and prediction of company’s growth and
value. Findings indicated a negative and relatively
significant relationship between net financing, stock
return, and future profit.
Faramarzi (2007) express that trade corporations offer
two strategies for their financing:
1. Financing from internal resources
2. Financing from external resources
Financing from internal resources is, in fact, use of
accumulated profit. That is, instead of distributing
profit among shareholders, they are employed in
activities inside the corporation to gain further return.
Financing from external resources is done through
distribution of stocks or borrowing.
The difference between financing through stocks and
financing through borrowing is the notion that in the
latter the company has provided its resources by
borrowing and is required to accomplish its
commitments to creditors before shareholders. Here,
paying money to creditors leads to saving of tax.
According to the above-mentioned companies provide
their resources the borrowing units. However, attention
must be paid to the fact that this type of financing is
very risky since in case the company is not able to pay
for its main and peripheral liabilities horrible
consequences would result (Faramarzi, 2007).
Now, what is the most appropriate method of financing
for the companies in a way that it would maximize
shareholders’ return? Researches in the realm of
investment optimization have led to the proposition of
many theories. Some of these theories will be discussed
in following parts.
TRADITIONAL THEORY
In this theory, it is claimed that there is a desirable
structure for investment and one company’s property
can be increased through optimal use of liabilities. This
theory suggests that companies are able to reduce their
investment by preserving the proportion of liability to
shareholders’ rights. Basic assumptions of the theory
are:
1. Financing is done merely through long-term
liabilities and distribution of normal stocks.
2. Decisions about investment of the company are
stable; i.e., either stocks are distributed for the aim of
rebuying bonds or bonds are distributed to rebuy
normal stocks.
3. There is no expense considered for bankruptcy and
tax.
Further, in this theory, it is claimed that although
shareholders do not react to a certain point of liability,
they would request more profit for their investment.
Here, optimal structure of investment is a point where
expense of company’s investment is lowest and its
property the highest. According to this theory, expense
of investment is dependent on the texture of company’s
investment and there is a desirable texture of
investment for each company.
In traditional theory, with increase of amounts of
liabilities, the interest rate expected by loan-granters
would increase. The more the liability, the more the
financial risk and so shareholders expect more interest
rate. In traditional theory, it is assumed that there is no
tax and therefore company’s value is in a relationship.
Assumptions proposed by this theory act as a starting
point for subsequent theories (Vafadar, 2008).
74
imposed on the firm is maintenance of more cash,
limiting payment of stock profit, limiting rewards and
prioritization, interference in selection of top managers,
controlling liabilities and forcing the reduce of
production and implementation costs (Izadinia and
Dastjerdi, 2009).
MODIGLIANI AND MILLER’S THEORY
Modigliani and Miller criticize traditional theory and
proved that expense of companies’ investment does not
depend on financial matters of the company, i.e. it is
stable at all levels. Also, in particular situations, value
of a company is stable disregard of finance through
loans or distribution of stocks. According to the role of
market, a company’s value cannot be promoted with
changing investment structure. In other words, value of
a company is independent of financial impacts and
structure of investment.
Modigliani and Miller inferred that, firstly, distribution
of company’s investment among liabilities and
shareholders or among other financing resources is not
important because, in practical, by distribution of
finance the company sells its real property to people.
Further, it is not important if its sells all its property
through distribution of stocks or reduce it into smaller
pieces and sell them part by part. Anyway, sum of parts
must be equal to the whole and therefore value of the
company is dependent on profit and danger of trade.
Secondly, investors can replace joint stock companies
with their own personal ideas and, in this way, shift
each investment structure to its initial form.
If two companies have similar investments in every
forms, except structure, their values must be equal.
Otherwise, there is the possibility of arbitrage. This
would lead to exchange of stocks in both companies as
much as both would have equal values (Izadnia and
Dastjerdi, 2009).
Bankruptcy expenses and Modigliani and Miller’s
theory
Leveraged firms are more probable to have a
bankruptcy than unlevered firms. When proportion of
liability to stock becomes more than a certain point,
ratio of bankruptcy probability increases and expense of
its investment would have a negative effect. Regarding
inability of forms to pay the liabilities or bankruptcies,
decisions about financing gets more importance and
firms have to forget investment programs beside
making attempts to maintain liquidity. As a result,
nobody would want to invest in a company with the
possibility of going bankrupted (the same).
STATIC TRADE-OFF THEORY
According to this theory, priority of tax liabilities
increases the value of a company which is under
liability. In addition, losses of probable bankruptcies as
a result of lack of accomplishment of commitments can
reduce value of a company. Thus, investment structure
of a company is, in fact, a homogeneity between
liability tax priorities and probable bankruptcy expenses
as result of liabilities and, finally, these two defusing
factors lead to optimal use of liability in investment
structure. In other words, based on this theory, it is
assumed that the company devises a certain amount of
liabilities and gradually moves towards it
(Abdollahzadeh, 1994).
There are some points about Static Trade-off Theory.
First, this theory usually explains balanced borrowing
on the basis of obvious concepts. Many people involved
with business undoubtedly accept tax proprieties of
borrowing and believe that more liability can cause
more expense. Second, investigation of analyses related
to financial expenses does not allow prediction of
testability in form of Static Trade-off Theory. Since
these expenses are dangerous for those companies with
a chance of improvement and significant hidden
properties, mature companies use more borrowing than
those developing companies with high advertisement
expenses. This is because already matured companies
maintain very high amounts of property (when other
conditions are equal). It seems that Static Trade-off
Theory might be supported by those studies
investigating behavior of stocks in relation to bonds,
rebuying or transaction of them (Esmaeilzadeh, 2004.)
THEORY OF LACK OF ASYMMETRICAL
DATA
According to this theory, managers have more
information about future than investors. This
phenomenon is called asymmetrical information. So,
since managers have more information about future of
the corporation, they see it unnecessary to share future
profit with others people. But, if managers are not able
to predict future well, then they remove financial needs
by distribution of stocks. Therefore, announcement of
stocks by well-known matured corporations which have
many ways to financing means that managers do not
see a clear future for the company (Izadinia and
Dastjerdi, 2009).
EXPENSES OF LOCATORS
Loan grantors (creditors) expect that their investments
be guaranteed in the company and that probability of
bankruptcy be minimized. In fact, profits among
investors (shareholders, bond owners and loan grantors)
and managers make management to be controlled and
limitations be devised in giving loans or credits. They
require managers to offer compensatory contracts,
encouragements and rewards. As liabilities increase, tax
expenses need to be reduced. Some limitations that can
75
1. There is no desirable liability ratio for corporations.
2. Profiting companies tend to borrow less.
3. Corporations tend to accumulate liquid assets.
A theory of location expenses which is based on this
theory is identified in an economic framework
including two beneficiary contradictions: 1) beneficiary
contradiction between managers and shareholders; and
2) beneficiary contradiction between shareholders and
bond owners. Based on this theory, creating a balance
between advantages of liabilities and expenses of
location liabilities, we can reach an optimal and
desirable investment (Bagherzadeh, 2003).
PECKING ORDER THEORY OF FINANCING
CHOICE
This theory states that corporations go through an order
which is the result of asymmetrical information. On this
basis, corporations prefer internal methods of financing
to external methods. In case they select the latter, they
prefer borrowing to distribution of stocks. What
motivate managers for this is distribution expenses.
Internal financing prevent distribution expenses and in
case external financing is required, cost of distribution
of bonds is less than cost of distribution of stocks
(Mashayekhi and Shahrokhi, 2006).
In this theory, there is no pre-set optimal compound of
different types of liabilities and stocks. This is because,
there are two types of property rights: internal and
external. One is the first while the other is the last
priority. Therefore, proportion of each companies
liabilities reflects its accumulated needs for external
financing (Brili and Mayers, 2004).
This theory has an important reflection most important
of which can be the following:
RESEARCH METHODOLOGY
Method: The present study is a descriptive one based
on analysis of regression which makes use of
compound analysis of data to investigate the problem.
Research conceptual model: Research model is
presented based on Nissim and Penman (2003) as the
following:
Operating Liability
Leverage
Future return of
shareholders’ rights
Contractual Operating
Liability Leverage
Estimated Operating
Liability Leverag
Current return of
shareholders
Sum of
leverage
Changes In
Estimated
Operating
Liability Leverag
Changes of
Contractual
Operating Liability
Changes in
Operating
Liability
Leverage
liabilities
Fig. 1: research conceptual model
3) Estimated operating liability leverage: Estimated
operating liability divided by net operational liabilities.
Dependent variables: Dependent variable in this study
is ‘shareholders’ future return’ which is shown by
FROCE in the model.
Shareholders’ future returns (FROCE): net profit
divided by shareholders’ rights in the next year.
Research population and sample: Population of the
present study includes all the companies accredited by
Tehran Stock Exchange. In summary, those companies
RESEARCH VARIABLES
Independent variables: There are 3 independent
variables in the present study:
1) Operating liability leverage: operational liability
divided by net operational asset
2) Contractual operating liability leverage: contractual
operational liability divided by net operational asset
76
which had the following conditions were selected as the
sample:
1. They are not financial corporations
2. They have been present in Tehran Stock Exchange
from 2008 to 2013; information about them is
comprehensive and available.
3. Shareholders’ rights and their operational net assets
are positive in all time periods of the study.
Data collection procedure: For aims of testing
assumptions, required data were collected by referring
to calculated inventories of companies accredited in
Tehran Stock Exchange using software designed by
Tadbir-pardaz Company. Information related to
research theoretical basics were collected through a
library method using Persian and Latin books.
Data analysis procedure: In the present study, the
relationship between operational liability leverage and
shareholders’ future return accredited by Tehran Stock
Exchange was investigated. First, descriptive statistics
were presented and then, using statistical tests, variance
asymmetries and correlations were analyzed. Then,
assumptions were confirmed or rejected through
analysis of regression patterns obtained from
investigation of significance of regression model and
coefficients of variables.
Descriptive statistics: Table 1 incorporates a summary
of characteristics of descriptive statistics used in the
present study. Reported statistics are indexes and
central criteria including mean, medium and
distribution indexes such as variance, standard
deviation and skewness of variables used in the present
study.
Table 1: Results of descriptive statistics
Standard
Stand
Kurto
error of
Skewn
ard
Mean
sis
skewness
ess
deviati
coefficient
on
335.13
0.104
16.245
0.957
0.3493
7
maximu
m
Minim
um
Standard
error of
kurtosis
coefficient
20.182
-2.67
0.207
3.819
-2.67
0.207
18.036
0.104
1.388
0.454
0.3722
555
20.431
0.02
0.207
0.104
2.458
2.261
2.6029
555
28.424
0.03
0.207
0.104
11.383
1.587
0.7729
555
24.095
-0.45
0.207
0.104
10.962
1.372
0.5959
555
4.329
0.004
0.207
0.104
9.433
0.272
0.1739
555
26.231
-34.71
0.207
10.034
175.18
7
164.01
5
120.69
3
181.45
6
0.104
-4.234
2.096
0.0163
555
22.186
-33.18
0.207
204.60
7
0.104
-6.472
1.895
0.0117
555
4.045
-2.60
0.207
86.452
0.104
4.175
0.301
0.0051
555
Change
s in
Operati
onal
liability
leverage
Shareholders’ future
return
Return of this year’s
shareholders
Total leverage
Operational liability
leverage
Contractual operational
liability leverage
Estimated Operational
liability leverage
Changes in Operational
liability leverage
Changes in Contractual
operational liability
leverage
Changes in Estimated
Operational liability
leverage
TESTING RESEARCH ASSUMPTIONS
OLLEV: Changes in operational liability leverage
Chang
es in
Contra
ctual
operati
onal
liabilit
555
Variables
COLLEV: Changes in Contractual operational
liability leverage
EOLLEV: Changes in estimated operational liability
leverage
FROCE: future return of shareholders’ rights
ROCE: Return of this year’s shareholders
TLEV: total leverage
OLLEV: Operational liability leverage
COLLEV: contractual operational liability leverage
EOLLEV: Estimated operational liability leverage
Changes
in
Estimate
d
Operatio
nal
liability
Nu
mbe
r
Test of variables linearity and normalization of
data:
Table 2: Table of correlation for testing linearity of data
Contrac
Estimat
Operat
tual
Return
ed
ional
Sharehold
operati
Total
of this
Operati
liabilit
ers’
onal
lever
year’s
onal
y
future
liability
age
shareho
liability
leverag
return
leverag
lders
leverage
e
e
77
variables
leverage
y
leverag
e
1.00
1.00
1.00
-0.081
0.057
1.00
0.006
0.883
0.356
0.000
1.00
0.116
0.006
0.013
0.759
0.017
0.696
1.00
0.493
0.000
0.129
0.002
-0.007
0.877
0.077
0.873
1.00
0.356
0.000
0.624
0.000
0.026
0.535
0.105
0.014
0.062
0.148
1.00
0.446
0.000
0.520
0.000
0.527
0.000
0.014
0.751
-0.153
0.000
-0.010
0.819
1.00
0.494
0.000
0.386
0.000
0.496
0.000
0.495
0.000
0.014
0.741
-0.151
0.000
-0.011
0.787
0.624
0.000
0.307
0.000
0.676
0.000
0.504
0.000
0.551
0.000
0.007
0.866
-0.113
0.07
0.005
0.905
Pearson
coefficient of
correlation
significance
Pearson
coefficient of
correlation
significance
Pearson
coefficient of
correlation
significance
Pearson
coefficient of
correlation
significance
Pearson
coefficient of
correlation
significance
Pearson
coefficient of
correlation
significance
Pearson
coefficient of
correlation
significance
Pearson
coefficient of
correlation
significance
Pearson
coefficient of
correlation
significance
Shareholders’
future return
Return of this
year’s
shareholders
Total leverage
Operational
liability leverage
Contractual
operational
liability leverage
Estimated
Operational
liability leverage
Changes in
Operational
liability leverage
Changes in
Contractual
operational
liability leverage
Changes in
Estimated
Operational
liability leverage
Table 3: Results of White Test of Heteroscedasticity
Probability
Statistic
Explanation
52.45697
0.00000
F-statistic
0.00000
241.1925
Obs*R-squared
INVESTIGATION OF HETEROSCEDASTICITY
OF VARIANCE
In this test, assumptions are defined as the following:
H0= homoscedasticity of variance
H1= heteroscedasticity of variance
Using F (Fischer) statistic, it can easily be judged
whether the model has heteroscedasticity or not; in a
way that probability of F (Prob (F- Static)) is higher
than level of error (Alpha), assumption of H0 is
accepted and so Homoscedasticity of variance is
accepted. In case the opposite is proved and the model
has heteroscedasticity, use can be made of generalized
Least Squares (GLS) to remove it. Moreover, to
investigate the existence of heteroscedasticity of
variance, use has been made of White Test. Results of
White heteroscedasticity of Variance Test is as the
following:
Since these test are significant at 5% level of
significance, assumption homoscedasticity of variance
is rejected and heteroscedasticity of variance is
accepted.
INVESTIGATION OF SELF-CORRELATION
For testing lack of self-correlation in the model, use has
been made of Durbin-Watson statistic and assumptions
are defined as the following:
H0= no self-correlation
H1= self-correlation
As an experimental regulation, is Durbin-Watson value
is between 1.5- 2.5, assumption H0 is accepted, i.e. lack
of correlation between the residual. As shown in table
2, this value is 1.95. According to the obtained value,
78
assumption H0 is accepted as we can show that there is
no correlation in this model.
Table 5: Hausman Test
Hausman value
p-value
0.00
65.28
TEST F AND HAUSMAN TEST
5. Regression Analysis (process of testing assumptions)
To test assumptions by regression use has been made of
compound data. Summary of the results obtained from
Eviews software are presented in the following table. In
other words, the following equation has been tested.
FROCE = α0 + α1 ROCE + α2 TLEV + α3 OLLEV +
α4 COLLEV +
Test F examines equality of intercept coefficients of
different points and Hausman Test reinforces a model
of random and fixed effects whose results are shown in
tables 4.4 and 4.5. Since, obtained p-value from F-Test
is equal to zero, zero hypotheses are rejected (p-value <
0.05) and method of panel data is accepted. Null
hypothesis and opposite hypothesis are as the following
for F-Test:
H0= compound data method
H1= panel data method
α5 EOLLEV + α6
According to p-value obtained from Hausman Test, that
is 0, null hypothesis of Hausman Test is rejected (Pvalue < 0.05) and method of fixed effects is confirmed.
Null hypothesis and the opposite one are Hausman Test
are as the following:
H0= method of random effects
H1= method of fixed effects
P value
95%
Positive
significant
0.0000
_
Not significant
0.3673
95%
95%
_
95%
95%
_
OLLEV: Changes in operational liability leverage
COLLEV: Changes in Contractual operational
liability leverage
EOLLEV: Changes in estimated operational liability
leverage
Table 6: Results of compound regression test
Type of
relationship
95%
COLLEV + α8
EOLLEV + ε
In this model:
FROCE: future return of shareholders’ rights
ROCE: Return of this year’s shareholders
TLEV: total leverage
OLLEV: Operational liability leverage
COLLEV: contractual operational liability leverage
EOLLEV: Estimated operational liability leverage
Table 4: Lymr F-Test
Lymr F statistic
p-value
0.00
4.56
Level of
significa
nce
OLLEV + α7
Positive
Significant
Positive
Significant
Positive
Significant
Not significant
Positive
Significant
Positive
Significant
Not significant
0.0000
0.0050
0.0030
0.8983
0.0000
0.0000
0.0760
T value
4.4581
54
0.9025
53
7.6303
39
2.8216
93
2.9843
85
0.1278
71
4.8415
40
4.7516
39
1.7787
65
Standard
error
Coefficie
nt
Independent variable
0.026170
0.116669
Intercept
0.067730
-0.061130
Return of this year’s
shareholders
0.009991
0.076232
total leverage
0.172971
0.487072
Operational liability leverage
0.173745
0.518522
contractual operational
liability leverage
0.198095
-0.025331
Estimated operational liability
leverage
0.083271
0.403161
0.083956
0.398928
0.089392
0.159008
DurbinWatson
D- W
F
probabil
ity
F
Statistic
Deviation from
mean regression
Adjusted
coefficient of
determination
1.983302
0.000
9.40022
0.604636
0.641477
79
Changes in operational
liability leverage
Changes in Contractual
operational liability leverage
Changes in estimated
operational liability leverage
Coefficient
of
determinati
on
0.717841
Weighted
5
1.955561
--
--
--
--
According to results obtained from Test of Regression
Model, as shown in table 6, it can be observed that Pvalue in F (prob (F-statistic)) is equal to 0.000 and this
indicates that the model is significant at %95 level of
significance. Adjusted coefficient of determination (R2)
is equal to 0.641477 and indicated that about %64 of
changes in dependent variable can be defined using
independent variables of the model and shows that this
regression has a fair power of explanation.
0.292274
statistics
Not weighted
statistics
As it is shown in table 6, coefficient of independent
variable of contractual operational liability leverage is
2.98 and its significance value is 0.003. According to
statistic t and p-value of this variable, findings indicate
that there is a significant relationship between
contractual operational liability leverage and future
return of stockholders’ shares in accredited companies
of Tehran Stocks Exchange and so, in the first
subsidiary hypothesis, H1 is accepted.
Testing second subsidiary hypothesis: There is
significant relationship between estimated operational
liability leverage and future return of stockholders’
shares in accredited companies of Tehran Stocks
Exchange.
H02= There is no significant relationship between
estimated operational liability leverage and future
return of stockholders’ shares in accredited companies
of Tehran Stocks Exchange.
H12= There is significant relationship between
estimated operational liability leverage and future
return of stockholders’ shares in accredited companies
of Tehran Stocks Exchange.
As it is shown in table 6, coefficient of independent
variable of estimated operational liability leverage is –
0.127 and its significance value is 0.898. According to
statistic t and p-value of this variable, findings indicate
insignificance at %5 level of significance and so there
is no significant relationship between estimated
operational liability leverage and future return of
stockholders’ shares in accredited companies of Tehran
Stocks Exchange and so, in second subsidiary
hypothesis, H0 is accepted.
Testing third subsidiary hypothesis: Current return of
stockholders’ shares lead to a balance in the
relationship between stockholders’ future return and
operational liability leverage.
Hypotheses 0 and 1 are defined as the following:
H03: Current return of stockholders’ shares does not
lead to a balance in the relationship between
stockholders’ future return and operational liability
leverage
H13= Current return of stockholders’ shares lead to a
balance in the relationship between stockholders’ future
return and operational liability leverage
As it is shown in table 6, coefficient of independent
variable of current return of stockholders’ rights is –
0.90 and its Prob) significance value is 0.367.
According to statistic t and p-value of this variable,
findings indicate no significance at %5 level of
significance and Current return of stockholders’ shares
does not lead to a balance in the relationship between
stockholders’ future return and operational liability
TEST OF THE MAIN HYPOTHESIS
There is significant relationship between operational
liability leverage and future return of stockholders’
shares in accredited companies of Tehran Stocks
Exchange.
H0= there is no significant relationship between
operational liability leverage and future return of
stockholders’ shares in accredited companies of Tehran
Stocks Exchange.
H0: βi = 0
H1= There is significant relationship between
operational liability leverage and future return of
stockholders’ shares in accredited companies of Tehran
Stocks Exchange.
H1: βi ≠ 0
As it is shown in table 6, coefficient of independent
variable of operational liability leverage is 2.82 and its
significance value is 0.005. According to statistic t and
p-value of this variable, findings indicate that there is a
significant relationship between operational liability
leverage and future return of stockholders’ shares in
accredited companies of Tehran Stocks Exchange and
so H1 is accepted for the first hypothesis.
TESTING SUBSIDIARY HYPOTHESIS
Testing first subsidiary hypothesis: There is
significant relationship between contractual operational
liability leverage and future return of stockholders’
shares in accredited companies of Tehran Stocks
Exchange.
For the test of this hypothesis, null hypothesis and
hypothesis 1 is defined as the following:
H01= There is no significant relationship between
operational liability leverage and future return of
stockholders’ shares in accredited companies of Tehran
Stocks Exchange.
H11= There is significant relationship between
operational liability leverage and future return of
stockholders’ shares in accredited companies of Tehran
Stocks Exchange.
80
leverage and so, in third subsidiary hypothesis, H0 is
accepted.
Testing fourth subsidiary hypothesis: Total leverage
leads to a balance in the relationship between
stockholders’ future return and operational liability
leverage.
H04: Total leverage does not lead to a balance in the
relationship between stockholders’ future return and
operational liability leverage.
H14= Current return of stockholders’ shares leads to a
balance in the relationship between stockholders’ future
return and operational liability leverage
As it can be seen in table 6, coefficient of independent
variable of total leverage is 7.63 and significance value
is 0.000. According to statistic t and p-value for this
variable, findings indicate no significance at %5 level
of significance. These findings show that total leverage
leads to a balance in the relationship between
stockholders’ future return and operational liability
leverage and so H1 is accepted for the fourth
hypothesis.
These findings are indicative of the fact that, since
liability of participant companies includes 49%
operational and 50% financial liabilities, there is a
positive relationship between operational liability
leverage and future return of stockholders’ shares in
accredited companies of Tehran Stocks Exchange.
Reason for this can be that these two liabilities are not
related to each other. Nissim and Penman (2003)
concluded that financing through operational liabilities
has positive significant relationship on stockholders’
future profiting. In studies carried out on financing,
Ricardson et al. (2003) and Shaw et al. (2006) found
out that there is negative significant relationship
between external financing and stocks return and future
profiting in the companies. Finally, they found out that
prediction of future return is highly dependent on
investment structure. Delavari (1998) concluded that
taking loans does not have any desirable effect on
return of stockholders’ rights. Furthermore, Ebadi and
Dolatabadi (2002) concluded that distribution of stocks
and increase of investment has more effects on stocks
return than loan taking.
RETURN EQUATION OF RESEARCH MODEL
RESEARCH COMPREHENSIVE CONCLUSION
As it can be seen in table 6, variables of operational
liability leverage, contractual operational liability
leverage, total leverage, changes in operational liability
leverage and changes in contractual operational liability
leverage have significant relationships with future
return of stockholders’ shares. Based on significance of
variables and type of their relationship, total return
equation for this research model can be presented as the
following:
FROCE = α0 + α2 TLEV + α3 OLLEV + α4 COLLEV
+ α6
OLLEV + α7
What encourages financial providers to make use of
their resources in certain activities is desirable
functioning of the activity. This is because desirable
functioning leads to increase of companies’ values
which consequently lead to increase of resource
owners. So, decisions about financing can be deemed as
a critical part of management decisions. Making
decisions about how to finance has a significant role in
changing companies’ values and is counted as a
challenge for the managers.
A desirable financing can increase companies’ value,
add to mangers’ reliability, make stockholders happy
and increase a company’s credit. On the other hand,
undesirable financing which cause exit of liquid net
credits from the company reduces company’s credit and
end with stockholders’ dissatisfaction and manager’s
less reliability. It can also cause bankruptcy in the
company.
Theoretically speaking, investment structure of each
profit unit includes an amalgamation of all types of
liabilities (short-term and long-term) and objects related
to shareholders’ rights. Generally, managers of profit
units tend to amalgamate investment structures based
on economic conditions and management policies. In
this way, some managers tend to borrow and increase of
liability due to tax advantages while others tend to
reduce expenses of bankruptcy and control them by
reducing proportion of liability in the mixture of
investment structure. This means that the existence of a
set of thoughts can be helpful in the selection of
different parts of investment structure according to
COLLEV+ε
CONCLUSION
Generally, conclusion is one of the most important and
fundamental parts of each research. Suggesting
strategies and solutions to improve to problem for
which research has been designed is important too. We
hope we have been able to promote financial
management and to help investors and decision makers
in this field of study.
EXPLANATION OF RESULTS OF MAIN
HYPOTHESIS
There was a significant relationship between
operational liability leverage and stockholders’ future
return. Findings showed that there was a significant
relationship between operational liability leverage and
future return of stockholders’ shares in accredited
companies of Tehran Stocks Exchange.
81
advantages and disadvantages of each. Availability of
optimized investment structure to increase profiting of
profit units has challenged managers in making
decisions.
12.Mayerz, A., translated by farhad Abdollahzadeh
(1994). architecture of investment structure; Journal
of Accounting structure, 1 (2), pp. 71-90.
13.Nissim, D., and Penman, S., (2003). "Financial
Statement Analysis of Leverage and How It Inform
About Profitability and Price-to-Book Ratios",
Review of Accounting Studies 8. pp. 531–560.
14.Razaghi, M. (2007). an investigation of financing
methods of car manufacturing companies accredited
in Tehran Stocks Exchange; PhD dissertation.
15.Vafardar, M.; analysis of the effect of investment
increase on transactions and price of stocks in those
companies accredited in Tehran Stocks Exchange,
MA thesis; Islamic Azad University; Tehran central
branch.
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