Investigating the Impact of Market Timing on the Capital Structure of the Selected Companies in Tehran Stock Market

Based on the theory of market timing in the framework of capital structure, the time of issuing stock depends on the stock prices. This way, managers issue shares that have a high ratio of market value to book value. In fact, issuing shares is in the best interest of the firm when the company's stock in the market is more than its actual value. In this paper, by using panel data of 55 firms listed in Tehran Stock Market between 2003 and 2018, we investigate the impact of market timing on the capital structure. The estimated model in this paper is a partial dynamic model using Generalized Method of Moment (GMM) and Arrelano-Band Estimates. The findings indicate that 1: market timing affects the firm`s capital structure of Tehran Stock Exchange. 2: market condition has a significantly negative effect on the capital structure which means that in hot markets, managers issue more equity and less debt. 3: firm size and tangible assets have significantly positive effects on leverage ratio. In fact, larger firms with more tangible assets face lower default risks, thus they have relatively more debt. 4: profitability variable influences corporate leverage negatively. 5: sanction and exchange rate variables have negatively significant effects on the capital structure.