STUDY OF THE RELATIONSHIP BETWEEN OVERINVESTMENT, LEVERAGE, AND LIQUIDITY IN COMPANIES LISTED IN TEHRAN STOCK EXCHANGE

Abstract

This study was conducted aimed at examining the effect of companies’ liquidity and leverage on their overinvestment. Surplus liquidity can affect the financial behavior of companies and accompany them in generating overinvestment in projects. Likewise, the increase in capital of the companies can play a significant role in increasing their leverage. This study sought to answer two main questions: 1) what effect does companies’ leverage have on overinvestment in projects, and 2) what effect does companies’ liquidity have on the relationship between leverage and overinvestment? In this causal-comparative study, the analysis was performed on the basis of panel data and multiple linear regression. Data from 118 companies was collected during 2013-2017. Data analysis and hypothesis testing were performed using EXEL and EVIEWS software. According to the findings, there was a significant relationship between companies’ liquidity and leverage with overinvestment. In addition, the results indicated that companies’ liquidity had no effect on the relationship between leverage and overinvestment