Debt Contracts and Capital Structure Adjustment Speed in the Tehran Stock Exchange

Abstract

Purpose of the Study: A competitive market and the complexity of the business environment led to the special attention of practitioners in the field of economics to the capital structure and, especially, economic units of debts. The current study investigates the relationship between debt contracts and changes in the capital structure of 114 companies listed on the Tehran Stock Exchange from 2011 to 2016.
 Methodology: In this research, the data was extracted, classified, and calculated by using Excel software and ultimately, the hypotheses were tested at a 95% confidence level through E-views‏ ‏and Stata software.
 Conclusions / Results: The results indicate that there is no significant relationship among debt contracts, debt contract restrictions, and debt contract in the unfavorable financial conditions with the capital structure adjustment speed in the companies listed on the Tehran Stock Exchange in the studied time interval, but this relationship is visible between two variables of debt contracts and capital structure adjustment speed in the companies that have a high financial leverage.
 Novelty: The study of financing of leveraging methods is very important in considering different factors. That is, choosing any cheap or expensive debt on the part of the company, while changing the cost of capital, will create favorable profit opportunities or lead to a critical situation. Accordingly, the present research in the subject area, time, and place of interest can overcome the doubts of stakeholders in the mindset of companies.