Investigating the Nonlinear Relationship between Financial Leverage and Capital Intensity: Empirical Evidence from Companies Listed in Tehran Stock Exchange

Financial leverage plays a decisive role as an important tool in corporate finance and the capital structure in investment decisions. In this study, the ratio of total debt to total assets is used as a measure of financial leverage, and fixed assets to total assets ratio as an independent variable, a measure of capital intensity has been considered. The samples used in this study consisted of 111 companies listed in Tehran Stock Exchange during the period 2007 to 2012 and regression between variables is used for hypothesis test. This paper suggests a non-linear relationship between capital intensity and financial leverage of companies listed in Tehran Stock Exchange.