Analyzing the Effect of Financial Constraints on Portfolio Efficiency of Investment Corporations Listed in Tehran Stock Exchange

Due to restricting access to required funds for investment, financial constraints can hinder making optimal decisions with regard to investment and consequently leads to firm’s loss of investment opportunities. Certainly, appropriate reaction of companies facing financial constraints could effectively prevent these negative effects. The primary purpose of the current study is to investigate the reaction of the investment corporations taking into account the facet of investment efficiency in decision making as appropriate reaction in facing of financial constraints. Population of the study is listed investment corporations in Tehran’ Stock Exchange from 2009 to 2011. Regarding the purpose of the study, financial constraint was considered as independent variable and portfolio efficiency of investment corporations as the dependent variable. Financial constraint was measured using a new method based on TOPSIS ranking techniques applying 12 financial constraint criteria. The model has been estimated by fixed effect method based on panel data. The results of the study reveal that the financial constraints of listed investment corporations in Tehran Stock Exchange lead to an increase in average Tobin’s Q of investment corporations portfolio and as a result an increase in the investment efficiency of portfolio.