Study on The Impact of Capital Budgeting and Capital Cost on Leverage Volatility of The Firms Listed in Tehran Stock Exchange

Abstract

This paper explores the impact of capital cost and capital budgeting on leverage volatility. In doing so, we investigated the financial information of 106 firms listed on Tehran Stock Exchange during 2008-2013. Then we analyzed the results using Spss 20, Eviews 7 and Minitab 16. Next, we determined the fit of model and obtained the results from classical regression assumptions for the models. The results indicated that a significant direct relationship existed between capital budgeting and capital structure, which confirmed the first hypothesis. Finally, we concluded that a significant inverse relationship existed between capital cost and capital structure, which confirmed the second hypothesis.