International journal of management sciences and economic
E-ISSN: 2345 - 637x
P-ISSN: 2345 - 222x
Investigating the Relationship between Financial Leverage and Stock Returns with the Emphasis on the Industry Type and Corporate Life Cycle in Companies of Tehran Stock Exchange
Capital market has a vital role in economy. This market not only activates stagnant money and capital through the companies, but it acts as economic boom indicator. Risks and returns are two key factors in various investments. The return that an investor gains is NOT definitive, therefore, he has to take risks. On the other hand, in a rational investment, the non-systematic risk can be eliminated or reduced by various investments and industries. This study investigates the relationship between financial leverage and stock returns with the emphasis on the industry type and corporate life cycle in companies of Tehran Stock Exchange. In this framework, after describing the theoretical principles and literature review, three hypotheses were formulated in order to investigate the relationship between financial leverage and stock returns with the emphasis on the industry type and corporate life cycle in companies of Tehran Stock Exchange. In addition to describing the study methodology, study purposes and domain were stated. The sample includes 198 companies in Tehran Stock Exchange during 2006-2016 which were selected by systematic elimination method. The hypotheses were tested by multiple regressions with compilation data after F Limmer test. The descriptive statistics of study variables, normality test and variance heterogeneity test were done by Eviews8 software. The results show that financial leverage of basic metals, beverages, metal products and machinery and equipment industries has a positive effect on the stock returns of the same companies and financial leverage of chemical materials industry has a negative effect on the stock returns. Also, the results indicate that the financial leverage affected by corporate life cycle has a positive effect on the corporate stock returns.