The Effect of Risk on Firm Performance: Evidence from Automobile Companies Listed in Tehran Stock Exchange (TSE

The debate, on which factors affect firm performance, has been a controversial issue in accounting and finance. This study assesses the effect of risk factors on firm accrual-based and cash flow-based performance measures in Automobile Companies in Tehran Stock Exchange for the period from 2005 to 2010, using Spss19 software, OLS (Ordinary Least Squares) regression method. Financial leverage and operating leverage as risk factors, ROI (Return on Investments) and OCFR (Operating Cash Flow Return) as firm performance measures are considered. Results showed that financial leverage does not have significant effect on ROI and OCFR.Operating leverage affects only on ROI. Operating leverage is negatively related to ROI. This study concludes that accrual based measure performs better than cash based one.

Firm Performance % Risk % Operating Leverage % Financial Leverage % Return on Investments % Operating Cash Flow Return