Application of Market Timing Theory and Nonlinear Relation of Revised Pecking Order Theory to Corporate Capital Structure

In this research, using the market timing theory and the revised theory of pecking order, the factors affecting the choice of financing method are identified and prioritized. In this study, data of 183 companies listed on the Tehran Stock Exchange were collected. To collect information and data, the library method was used and in order to investigate the relationships between variables and test the hypotheses, the multiple regression model in Eviews software version 10 was used. The main hypotheses of this research are based on the fact that in order to make management decisions about the optimal capital structure of the company, we can act based on the model of market timing theory and revised theory of pecking order. In the results of this study, the companies in order to finance themselves, in fact, follow the theory of pecking order and market timing. The research findings show a non-linear ᴜ shape relationship between debt and deficit changes and a direct linear relationship between capital and deficit changes. Also, testing the model related to market timing shows a positive and significant relationship between the weighted average of external financing and capital structure.