M.A. Thesis:

The Effect of Financial Distress on Price-to-Book value Ratio and the Implied Cost of Capital

Implied cost of capital is one of the major issues in financial decision making and choosing the optimal ways to invest funds and capital structure to increase the overall value of the entit. Purpose of the present research is to investigate the effect of financial crisis on the ratio of price to book value and the cost of implicit capital of listed companies in Tehran Stock Exchange.. To this end, information about 140 active companies in the stock market during the years 2014 to 2018 was collected and analyzed using the software EVIEWS. The research method is a multivariate regression and based on the panel data. According to the results of the research and statistical tests, we can say that there is a negative and significant relationship between financial crisis and the price-to-book ratio. Also, there is a positive and significant relationship between financial crisis and the implied cost of capital. In critical situations, financing can be costly and so the cost of capital increases. In times of financial crisis, corporate risk levels have increased, And as the risk increases, investors demand a higher rate of return from the company, so the cost of capital increases.

Keywords: Implied cost of capital, financial crisis, price-to-book ratio