Determinants of risky financial assets holding by industrial firms in Tehran Stock Exchange & contribution of these holdings to firm value

Document Type : Original Article

Authors

1 Assistant Prof, Department of Financial Management and Insurance University of Tehran, Tehran, Iran.

2 Assistant Prof, Department of Financial Management and Insurance, University of Tehran, Tehran, Iran.

3 Assistant Prof, Department of Financial Management and Insurance University of Shahid Beheshti, Tehran, Iran.

4 Ph.D. Candidate in Finance, University of Tehran, Tehran, Iran.

Abstract

Some industrial firms in Tehran Stock Exchange invest a considerable part of their assets in financial assets and sometimes risky financial assets like stocks & fixed income securities. This research investigated motivations that affect industrial firms’ demand for risky financial assets and  the effect of this asset management on creating abnormal return for stockholders and increasing firm’s value. The data set we used in this research were cash, cash equivalent, short term investment, long term investment and other assets. Research time frame was from 2009 to 2016 and the sample was from industrial firms of Tehran Stock Exchange.
    The results confirmed the impact of precautionary motive on this investment demand but not transactional and speculative motive. It also showed as corporate governance and ownership concentration improve, these investments increase. It also showed abnormal return could be attributed to financial assets but it could not increase firm’s value based on Fama-French approach, also investigating financing resources showed that the internal cash flow is the main source of investing in risky financial assets and firms usually did not use money from debt and equity issues for these investments.

Keywords

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Financial Management Perspective
Volume 9, Issue 27 - Serial Number 27
October 2019
Pages 169-197

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