Capital struture and economic value added

First, the capital structure is examined within the framework of financing policy in this study that covers the relation between capital structure and EVA, the financing policy, investment policy and dividend policy, which are the basic tasks of the financing management, as well as taking the decisions to maximize the value of company while deciding on these aspects are mentioned. As the conceptual definitions of the items that constitute the said two resources and the possible superiorities and disadvantages of each of them to the others are important for the decisions on optimal capital structure, they are mentioned theoretically. The theoretical approaches about the relation between the capital structure and the value of company as well as the capital cost that must be taken care in selecting the resources are given in the theoretical part of the study.Another topic in this study is the Economic Value Added that is used as a performance criterion. Theoretical approaches about EVA, its role in financing management and the steps that must be taken to increase EVA are examined by comparing the economic based and accounting based valuation methods. Calculation of EVA and the corrections that must be made to the capital for calculation, the application process of EVA, its advantages and disadvantages are described. It is tried to explain the relation of EVA with the stock prices, Market Value Added (MVA), Cash Value Added (CVA) and Return On Investment Capital (ROIC).Within the scope of this application, regression analysis was conducted about the relation between the capital structures and EVA of 32 companies that are listed in two separate sectors in Tehran Stock Exchange during 2002 ? 2006. Consequently, it has been concluded that the relation between the capital structure and EVA is too low for only a period in 6 periods when the sector that the company acts is not taken into account and when we analyze both sectors.When we take the sector of companies into consideration, we can see that the capital structure does not have any impact on in the industrial sector based on stone and soil, and that capital structure and EVA has a reverse relation in the metal goods, machinery and tools sector; therefore, increase in the debt cause decrease in EVA.When the results of analysis are reviewed, the relation between capital structure and EVA is affected from the sector of company. In other words, the relation between capital structure and EVA varies from one sector to the other. Although there is a significant relation between the two variables in some sectors, we can see that there is not any relation in other sectors. For this reason, the sector of company is important in studying on whether the capital structure is effective on EVA.