Effect of asset specificity on the financing method of listed companies in Tehran Stock Exchange (2000-2010)

Possession of strategic assets is a necessary condition for sustained competitive advantage. This condition is, however, not sufficient. Firms require financial management capability to realize the rents present in their strategic assets. The firm-specific nature of strategic assets implies that they be financed primarily through equity; other less specific assets should be financed through debt. In this study, we test these hypotheses using data from companies listed on the Tehran Stock Exchange, during 2000-2010. We run panel regression with STATA12 software. We find the negative correlation between the asset specificity and financing through debt and a positive correlation between assets specificity and the firms are financed through equity.