Evaluation of the Effect of Rewarding Managers on the Capital Structure and Financial Performance of Companies Listed on Tehran Stock Exchange

Abstract

Object and purpose of the study: The aim of this study was to evaluate the effect of rewarding managers on the capital structure and financial performance of the companies listed on Tehran Stock Exchange in the time period of 2005-2012.

Methods: Data of 58 companies and research hypotheses were tested using panel data and ordinary least squares of regression model.

Findings: Based on the results of the study, factors such as size of the company and the changes in cash and ratio of market value to book value of equity have significant negative impact on the capital structure of the company, the other conclusion is that there is a significant positive relationship between board bonus and financial performance and parameters such as the size of the company.

Conclusion: Rewarding managers causes to increase their efforts and thus increment of productivity and improvement of company performance.

Keywords: Rewarding managers, Capital structure, Financial performance, JEL Classification.