The Effect of Firm's Characteristics and Moderating Role of Government Ownership on Capital Structure in Tehran Stock Exchange

This paper investigates the effect of firms’ characteristics on leverage ratios of affiliated and unaffiliated firms in Tehran Stock Exchange (TSE), using data from 200 non-financial listed companies over the five-year period. A regression model with dummy variable and t-statistic has been used to test the six hypotheses. The results show a significant negative effect of profitability on leverage ratios. The effect of growth opportunity on leverage ratios is significantly positive and tangibility has a significant negative effect on short-term debt and total debt ratios but for long-term debt ratio the effect is positive. The effect of firm size on leverage ratios is not significant. The results also indicate that the government ownership has a significant effect on the relationship between firms’ characteristics and capital structure and the pecking order theory is strongly supported and is pertinent theory to the capital structure of Iranian companies.