The investigation of the long-run and short-run effects of macroeconomic variables on companies capital cost

The cost of capital is one of the most significant criteria in making financial decisions as well as evaluating the financial performance of management. This criterion affects the internal variables of the company and at the same time, it is affected by the environmental factors of the company, especially the macroeconomic variables. Considering the recent major changes of macroeconomic variables in our country, the aim of this study was to investigate the long-term and short-term effects of macroeconomic variables on the cost of capital. Using data from 219 companies listed in Tehran Stock Exchange from 2006 to 2016, five research hypotheses were tested and analyzed by using Autoregressive Distributed Lag (ARDL) method. The findings of the study based on the results of long-run relationship estimation show that interest rate coefficients, inflation rate, and oil price change rate are significant as expected and these variables have a positive and significant effect on company capital cost. So, in the long run, by increasingthe amount of these variables, the corporation cost of capital increases, and by reducing them, the cost of capital can be reduced. Likewise, in the short run, interest rate variable with one period delay, inflation rate variable with three periods delay, exchange rate variable with four periods delay, liquidity variable with four periods delay, and oil price variable with two periods delay have shown their impact on corporate capital cost. Therefore, although the period of impact of these variables is not the same, they have a positive and significant impact on corporate capital cost.