Survey of the Relationship between Capital Structure and Free Cash Flow with Financial Performance of Companies Listed in Tehran Stock Exchange

Abstract

Capital structure is one of the important issues in modern financial theory as not only raised in recent years but also it has received much attention from researchers in recent decade. The goal of cash flow management is restricting the levels of cash flow and maximizing wealth of shareholders. The main goal of this study is evaluation of the relationship between capital structure and free cash flows and financial performance in companies listed on TSE during 2009 to 2013. The capital structure and free cash flow are independent variables and return on asset, annual stock return and economic value added are dependent variables. Firm size is control variable. Generally, data collection method in theoretical basics of study is library method and in hypotheses test, document study of financial statement of companies in stock market site of Tehran can be applied. The statistical method in this study is Pearson correlation method and multiple regression. The results of study show that capital structure has inverse and significant association with evaluation criteria of financial performance (return on asset, annual stock return and economic value added) and firm size. Also, there is a direct and significant correlation between free cash flow and evaluation criteria of financial performance (return on asset, annual stock return and economic value added) and firm size.