Dynamics of Diversification, Capital Structure and Profitability

Document Type : Research Paper

Authors

1 PhD candidate of financial engineering, Department of Accounting and Finance, Faculty of Management, Yazd University

2 Ph.D. candidate in Finance- Financial Engineering, Yazd University

3 Associate prof. Department of Finance, Yazd University.

Abstract

This study investigates the dynamic relationship among diversification, capital structure and profitability of firms listed in Tehran Stock Exchange. The research sample selected using systematic elimination method, consists of 140 firms listed in TSE from 2011 to 2017. The hypotheses are analyzed using the panel VAR approach. Impulse response functions illustrate significant dynamic interrelationships in the financial sector. The results indicate that any coincident increase in finance diversification and capital structure of a firm optimizes a its profitability, and any increase in profitability results in increase of diver sification and capital structure. With increasing diversification, profitability will increase and capital structure will decrease. Further, if capital structure increases, the profitability will increase and diversification will decrease in firms listed in Tehran Stock Exchange.

Keywords

References

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Empirical Research in Accounting
Volume 11, Issue 4 - Serial Number 42
December 2021
Pages 169-186

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History

  • Receive Date: 11 October 2019
  • Revise Date: 29 September 2020
  • Accept Date: 29 March 2020

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