Investment Decisions of Firms under Financial Distress

Financial research widely, has studied the company's investment decisions. According to the literature, the relationship between cash flow and investment levels is a common technique for analyzing issues over or under investment. This research investigated the investment decisions of firms under financial distress in Tehran Stock Exchange for 280 observations (firm- year). In order to examine the hypothesis, we used panel data in way of dynamic Generalized Moment Model. Moreover, to robustness of results the data classified into two sections based on firms with high and low investment opportunity and least square estimator has been used. The findings by GMM-System estimator indicate that firms in financial distress that have high investment opportunity present greater propensity to over-invest. But when firms divided into two parts as mentioned above, the results show that generally in sample of Iranian firms listed during 2012 to 2015, failed firms without regard to investment opportunities have to raise the level of investment.