Explaining the Relationship Between Capital Structure, Agency Problem and Performance

Evaluating the performance of companies is one of the most important issues for managers, investors, creditors and other Stakeholders and the results of research, is a base of many internal and external decision making. Thus, the purpose of this study is examination of the relationship between capital structure and performance in the listed companies at Tehran Stock Exchange with an emphasis on agency costs. For this purpose once hypotheses are developed and data from 69 companies in Tehran Stock Exchange for the period between 2005 to 2014 are analyzed. In this study, for calculating capital structure and performance is used from leverage and return on assets respectively. For testing hypothesis of research, regression models is used in both static and dynamic. This regression models in static mode is used panel data with random effects approach, and in dynamic mode is used generalized method of moment (GMM) reviews and tests. The results in both static and dynamic models indicated that there is a U-shaped relationship between capital structure and company performance. Also, the dynamic model results showed that the performance of a prior period has a positive and significant relationship with the company's current performance. In addition, the results in both models showed that there is a U-shaped relationship between company size and company's performance.