The Relationship Between Cost of Capital and Financial Structure in the Companies Listed in Tehran Stock Exchange Market

Deciding on the best approach to investment in order to maximize shareholders’ wealth is one of the most important issues in the field of financial management. Studying the association between cost of capital and financial structure may contribute to determining the method of investment and corporate decisions. The underlying hypothesis in the present study is that there is a significant relationship between cost of capital and financial structure. This hypothesis was tested in a sample of 67 companies listed in Tehran Stock Exchange Market from 2009 to 2011 (three consecutive years) using Kolmogorov-Smirnov test and Pearson correlation formula. The results showed a significant negative correlation between cost of capital and financial structure.