Banking Sector Development, Capital Structure and Performance of Non- Financial FirmsListed in Stock Exchange

The current study estimates the effect of banking sector development on non-financial firms performance listed in Tehran Stock Exchange through possible effect on firm capital structure. To do so, the effect of banking sector development on capital structure on one hand and the effect of capital structure on firm performance on the other hand has been examined using unbalanced panel datawith in the framework of a triangular equations system. In this regard, indicators related to size and activity of banking sector and performance criteria like market value added and Tobin's Q has been used. The results show that capital structure has a positive effect on firm performance, and banking sector development has a negative effect on capital structure and subsequently firm performance. The results also shows that variables like profitability, tax and growth opportunities are effective on capital structure and variables like size, profitability, growth opportunities and degree of asset tangibility are effective on firm performance.