Factors Affecting the Profitability of Industries with Emphasis on Financing Methods )A Survey on Selected Companies in the Stock Market(

Mokri, Faranak; Jangi, Amirhoushang

Factors Affecting the Profitability of Industries with Emphasis on Financing Methods )A Survey on Selected Companies in the Stock Market(

Document Type : Original Article

Authors

Faranak Mokri ¹
Amirhoushang Jangi ²

¹ Ph.D. Student in Economics, Islamic Azad University, Tehran Jonoub Branch

² PhD of Accounting, University of Tehran, Economic Deputy of the Social Security Organization of the Armed Forces of the Islamic Republic of Iran

Abstract

This article examines the factors affecting the profitability and fixed assets of 110 stock market companies over a five-year period (2012-2013), with emphasis on their financing method. The independent variables are “cost of debt financing”, “cost of equity financing”, “company size”, “debt financing”, “equity financing”, and the dependent variables are “fixed assets” and “profitability indices” which the relation between these variables are estimated separately. In the first model, the effect of company size, fixed assets, debt financing and equity financing on profitability of the company is studied, and in the second model, the impact of company size, cost of debt financing and cost of equity financing on fixed assets of the company are examined. In order to investigate these relationships, the unit root test of variables was used to prevent spurious regression and the software used in this study is Eviews. The results show that in the first model the relationship between profitability and debt financing is negative and statistically significant, but there is no significant relationship between profitability and equity financing. In the second model, the relationship between fixed assets and the cost of debt and equity financing is positive and significant. Also, firm size was not significant in either model.

Keywords