mohammadmehdi zare shahneh

In This paper we examines the leverage deviation on the cost of capital of Tehran Stock Exchange companies .furthermore the sensitivity of the cost of equity to leverage deviation, has been analyzed to deduce the reasons of heterogeneity in capital structure among firms. the hypothesis of model released according to miller and Modigliani theorem 2. required data form 112 listed companies from the period of 1390 to 1400 to construct variables of model has been gatherd.to examine the hypothesis the companies categorized into overleverage and under leverage. Confirming theoretical predictions, we find that the cost of equity is positively related to leverage deviation and that firms whose cost of equity is more sensitive to leverage deviation exhibit faster speed of adjustment toward the target. Collectively, our findings imply that capital structure targeting is not equally important to all firms. Indeed, we argue that while evidence of the trade-off theory will tend to be obscured in broad samples, it can hold strongly in meaningfully chosen sub-samples of firms — namely, those characterized by high sensitivity of equity cost to leverage deviation.