The Effect of Debt Diversification on Firm Value and Stock Price Crash Risk
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Abstract
Debt diversification is a common practice among corporate firms around the world. However, the effect of debt diversity on company value is missing from the current literature. Stock price crash is defined as a very large and unusual negative shift in stock prices that occurs without a significant economic event and is considered as a phenomenon tantamount to negative skewness in stock returns. The purpose of this paper is to study the effect of debt diversification on the value of the firm and stock price crash risk among companies listed on the Tehran Stock Exchange. The number of sample companies was 157 firm-year observations in a 5-year period (2012-2016). Excel software was employed to calculate and classify the research variables. Then, research hypotheses were tested using the multivariate regression analysis in Eviews software. The results of the research indicate that debt diversification does not have a significant effect on the value of the firm, yet it has a significant effect on stock price crash risk. Moreover, the relationship between debt diversification and firm value does not have a significant effect on stock price crash risk.
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