Abstract
Article history: Received June 25, 2012 Received in revised format 28 October 2012 Accepted 30 October 2012 Available online November 2 2012 This study investigates the explanatory power of leverage and cash flows in future cash flow prediction in Tehran Stock Exchange by considering Signaling Theory and Pecking Order Theory. Based on theoretical foundations, the regression models of leverage and cash flow with a set of control variables was developed. Statistical samples consist of companies listed in Tehran Stock Exchange over the period 20052011. The results show that there was a negative relationship between cash flow and leverage levels in contemporary time. This is consistent with pecking order behavior. While at intertemporer level, there was a positive relationship between current leverage and the firm's cash flows in the future. This is consistent with signaling theory. © 2013 Growing Science Ltd. All rights reserved.
Highlights
The economical organizations identify every factor affecting the organization development aiming at achieving their objectives
The study was performed in terms of relation between cash flow with leverage level based on signaling Theory and Pecking order Theory
The results showed that financial leverage, cash flow, combination of financial leverage and cash flow together with a set of control variables could be used for forecasting of future cash flows in Tehran stock exchange listed companies
Summary
The economical organizations identify every factor affecting the organization development aiming at achieving their objectives. One of the factors with huge effect on organization success to achieve the goals is the cash in which the failure to set a plan could bring numerous problems for an organization. The knowledge about the available annual cash for an organization is very useful and available cash prediction could culminate to appropriate planning for organization resources and usage in the future. A company will be more successful if it predicts its needs for sources from present time and pacing forward to fulfill the need, . Financial sources of every firm comprise internal and external sources. Internal sources include cash flow derived from operations in addition to funds from the sale of assets and external sources include borrowing from financial markets and issuing stocks.
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