Review of the Correlation between Free Cash Flows and Debts Policies among the Listed Companies in Tehran Stock Exchange

Abstract

The purpose of this study was to investigate the correlation between free cash flow and debt policies among the listed companies in Tehran Stock Exchange. The term of this research is 5-year period (2008 -2012) and the research population were the listed companies in Tehran Stock Exchange. The sample was also obtained by screening 180 companies. The results of testing research hypothesizes using panel data suggest that an increase in free cash flow causes a decrease in debt of active companies in Iran's capital market. In addition, the results indicated that growth in the company's financial leverage ratio has a significant negative correlation with the free cash flow. However, the correlation between financial leverage and cash flows in value companies is not significant at the 95% confidence level.