Document Type: Research Paper


1 Department of Business Management, Rasht Branch, Islamic Azad University, Rasht, Iran

2 Assistant Professor, Department of Business Management, Rasht Branch, Islamic Azad University, Rasht, Iran

3 Professor, Department of Business Management, Rasht Branch, Islamic Azad University, Rasht, Iran


In real investment, there is a relationship between external financing and abnormal stock returns. This study predicts a negative correlation between external financing and stock returns. The dependent variable of the research is stock returns and the independent variables are net financing and equity ratio. Also, control variables of the research includes assets growth, company’s size and company’s age. In this research, the hypotheses have been tested using the financial statements of 178 industrial companies accepted in Tehran Stock Exchange over the 2012-2016 period and also regression models with panel data. The results indicate a positive correlation between external financing, in both net and composition cases, with abnormal stock returns and also a negative correlation between external financing –again in both net and composition cases- with abnormal stock returns in the stock model. In addition, when we use net and composition financing simultaneously, there is not a significant relationship between net and composition finiancing and abnormal stock returns.


Main Subjects

Abdolmaleki, S. (2017). A Study of the Role of Financing Methods in Improving the Decision-Making Behavior of Investors in Tehran Stock Exchange. Bimonthly Journal of Applied Studies in Management and Development, Second Year, No. 2 (Successive 4), 41-53.

Assadi, H. (2011). The Influence of Over-Investment on Investors' Response to Cash Holdings. Master's thesis.

Chowdhury, R., & Maung, M. (2013). Corporate entrepreneurship and debt financing: evidence from the GCC countries. International Journal of Managerial Finance, 9(4), 294-313.

Chua, S. H. (2012). Cash Holdings, Capital Structure and Financial Flexibility, Thesis Submitted to the University of Nottingham for the Degree of Doctor of Philosophy, 20-35

Ebrahim, M. S., Girma, S., Shah, M. E., & Williams, J. (2014). Dynamic capital structure and political patronage: The case of Malaysia. International Review of Financial Analysis, 31, 117-128.

Ferrando, A., Marchica, M. T., & Mura, R. (2014). ). Financial Flexibility Across the Euro Area and the UK, Working Paper Series, No 1630.

Hou, Q. (2015). Managerial Shareholding, Investment Flexibility,and Equity Valuation, the Author(s) this Article is Published with Open Access by the Hong Kong Polytechnic University.

Khani, A., & Afshari, H. (2013). A Review of Financing Decisions, Market Timing and Real Investment in Tehran Stock Exchange. Quarterly Journal of Asset Management and Financing, 1(1), 109-122.

 Kordestani, G., & Najafi O. M. (2010). The Effect of Financing Methods on Future Stock Returns. Journal of Accounting Progress, 2.

Özgür, A., Florackisb, C., & Ozkanc, A. (2012). Financial Flexibility, Corporate Investment and Performance: Evidence from East Asian Firms, Electronic Copy Available at:Http://Ssrn.Com /Abstract= 1234682.

Sadeghi , S. M., Chavoshi, K., & Mohseni, H. (2012). An Investigation of the Relationship Between Market Structure and Capital Structure in Tehran Stock Exchange. Economic Modeling Research, 3(9), 21-50.

Talebnya, Gh., Desineh, M., & Moridi, F. (2015). The impact of financing decisions on the management of cash flows. Researches in financial accounting and auditing, 7 2(6), 87-122.

Titman,S. & Wessels, R. (1988). Determination of Capital Structure‌ Choice, Journal of Finance, pp. 1-20.