The Effect of Operating Cash Flow and Capital Structure Decisions on the Investment Decisions of Firms Listed on The Tehran Stock Exchange (TSE)

In this paper, the effect of the operating cash flow and capital structure decisions was examined on the investment decisions in the cases before and after the crisis separately for small, medium, and large firms. Sample of study included over 80 firms in the 12 years tested by using Estimated Generalized Least Squares (EGLS) estimation method and Generalized Moments (GMM) estimation method. The results indicate that there is significant and positive correlation between operating cash flows and investment decisions of Tehran Stock Exchange firms, while these firms have spent much operating cash in investment in periods after the crisis. In addition, there was significant and positive correlation between leverage and investment decisions of Tehran Stock Exchange firms in the period before and after the crisis, while this correlation declined in periods after the crisis. Results suggest that domestic cash flows have been used as sources of financing with significant application in three small, medium, and large firms. In this regard, medium and small firms significantly had the highest use of this resource for investment. Medium and large firms also significantly used debt for financing their investments.