Examining the Relationship between Risk and Excess Return of Listed Companies in Iran

This paper is trying to investigate if there is any relationship between firm value and risk. In financialliterature risk of companies are divided into two main groups: systematic risk and unsystematic risk, soin this study we have tried to mention both of these risks. IN order to model the impact of risk on firmvalue we used operating leverage, financial leverage and intrinsic business risk as functions of risk andexcess return as a function of firm value, so, we have three independent variables and one dependentvariable. Excess return is the rerun which company has produced over fixed rate of return and can beused as one of firm value index. In order to test hypotheses we have use panel data to estimate multipleregression and collect the information of 90 samples of non-financial Iranian listed companies for theperiod from 2010 to 2014. Our empirical findings suggest that the degree of operating leverage andintrinsic business risk explain a large portion of the variation of excess return in dollar when financialleverage is not meaningfully correlated with the firm value .according to empirical findings of researchwe can conclude that there is a significant meaningful relationship between firm value and risk.

Keywords:

Operating Leverage , Financial Leverage , Intrinsic Business Risk , Firm Value