A Review of the Relationship Between Financial Performance and Financing Methods of Listed Companies Affiliated to the Defense Sector, and Proposing a Financing Model Through the Capital Markets

Defense projects in developing countries, by in large, are undertaken by governments in developing countries. Considering that defense projects usually require large amounts of funding; they take up a large portion of governments budgets. As such, the issue of determining the appropriate financing methods and tools for attracting the required financial resources finds its significance. By taking the European Union and the United States as case studies, this paper reviews the financing models of the defense sector through the capital markets; thus accordingly, a financing model through the capital markets for the industries and services related to the defense sector of Iran is proposed. Subsequently, by employing correlation analysis and Panel ARDL model, this paper turns towards examining the relationship between financing methods and the financial performance of listed companies affiliated to the defense sector during the 2001 to 2018 period. The results obtained from model estimations indicate that larger companies have been successful in attracting financial resources through issuing shares or accumulating profits; on the other hand, companies with higher profitability have been more successful in financing through acquiring debt.