Investigating the Effect of Instability in Financial Policies on the Choice of Investment Strategies in Companies on the Tehran Stock Exchange

Abstract

In today's world, although transnational factors have jeopardized the monopoly role of governments, especially in the field of economic activities, the economic structure of countries, especially developing countries, is still vulnerable to the instability of domestic policies. These factors, by affecting the economies of countries, distort all factors and fields of production and take the production process out of its natural state. Financial instability, as the most important internal but extra-structural factor, has the closest and most meaningful interaction with the concept of economic security in affecting the factors of production. Therefore, the aim of the present study is to model the effect of instability in financial policies on the choice of investment strategies of companies listed on the Tehran Stock Exchange. For this purpose, information from 130 companies listed on the Tehran Stock Exchange during the period 2013 to 2014 was used. Investment strategies in this study are divided into three strategies: defensive, analytical, and forward-looking. To calculate the company's strategy score, four measures were used: the ratio of the number of employees to the company's sales, the company's historical growth, the company's marketing and advertising efforts, and the company's organizational stability. These variables were then quintupled in each year, so that the observations in the lowest (highest) quintuplet were given a score of one (five). Then, for each company, the scores of the four variables were summed in the year to obtain a composite strategy score for each company-year between 4 and 20. The results of the study indicated that the financial policies of the companies are an effective factor in choosing the companies' investment strategies.