The Effect of Capital Structure and Product Market Competition on the Financial Performance among the Companies Listed in Tehran Stock Exchange

Abstract

The aim of the present study is to investigate the effect of capital structure and product market competition on the financial performance of the companies listed in Tehran’s Stock Exchange. To measure the financial performance of the return on assets and quantify capital structure variable, the financial leverage ratio was used. To test the research hypotheses, the pooled data analysis approach was used with a sample of 100 companies listed in Tehran’s Stock Exchange for the years 2008 to 2012. The results showed that the hypotheses of the study have been confirmed. The ratio of financial leverage in the companies had a significant positive correlation with asset returns. Also, the results showed that the more the product market competition, the stronger the relationship between the financial leverage ratio and the return on assets.