The Effect of Financial Development on the Investment of the Companies Listed on the Tehran Stock Exchange

The present study examined the impact of financial development on the investment of the companies listed on the Tehran Stock Exchange. To achieve this goal, data gathered from 258 companies during 2005 to 2016 and the dynamic generalized method of moments were utilized to formulate the investment model with financial constraints. The results of the study showed that these companies faced financial constraints on investment and financial development has increased their investment by reducing the financial constraints. The results also indicated that the positive effect of financial development on investment has been bigger in the case of larger companies than in smaller companies. It was further revealed that during the economic boom, financial constraints on companies were reduced and financial development led to the reinforcement of the positive effect of the boom on reduction of the companies’ financial constraints