Investigation the Interaction between Debt Policy and Institutional Ownership among Pharmaceutical and Non-Pharmaceutical Companies Listed on the Tehran Stock Exchange via Simultaneous Equations

Due to the importance of pharmaceutical industry and its relationship with the public health, and in order to investigate the existing relations in this industry, the present study examines the reciprocal relationships between debt policy and institutional ownership in pharmaceutical companies, and compares it with non-pharmaceutical companies listed on the Tehran Stock Exchange from 2002 to 2012. In this research, quasi-experimental design and panel data method have been used. Also, due to the existence of simultaneous skew in endogenous variables of the research and the recognition of equations as “just identified”, the research hypotheses have been tested by two-stage least squares method. The applied sample of the research consists of two groups of active pharmaceutical and non-pharmaceutical companies on the Tehran Stock Exchange (each group 187 years-company) which have been selected through pair sampling. The results derived from testing the research hypotheses show a significant difference in the studied relations in pharmaceutical companies beside non-pharmaceutical companies. It means that there is not a reciprocal and significant relationship between institutional ownership concentration, the level of institutional ownership, and debt policy among the pharmaceutical companies; however, these relationships in non-pharmaceutical companies, except for the level of institutional ownership variable's impact on debt policy, were identified as significant and negative. The absence of a meaningful relationship between the investigated variables in the pharmaceutical companies may be caused by the limited use of debt in the pharmaceutical industry due to the conflict of interests between the owners and creditors, or it may be the result of the lack of informational asymmetry.