Corresponding author. Tel: +98-912-4400915 E-mail: i.dadashi@gmail.com (I. Dadashi) © 2013 Growing Science Ltd. All rights reserved. doi: 10.5267/j.msl.2013.03.014 Management Science Letters 3 (2013) 1125–1132 Contents lists available at GrowingScience Management Science Letters homepage: www.GrowingScience.com/msl Investigating the effect of growth and financial strength variables on the financial leverage: Evidence from the Tehran Stock Exchange Iman Dadashi a* , Elham Mansourinia b , Milad Emamgholipour b , Seyedeh Maryam Babanejad Bagheri a and Ali Mohammadpour Arabi c a Department of Accounting, Babol Branch, Islamic Azad University, Babol, Iran b Young Researchers Club, Babol Branch, Islamic Azad University, Babol, Iran c Master's Degree in Accounting C H R O N I C L E A B S T R A C T Article history: Received December 1, 2012 Received in revised format 2 March 2013 Accepted 10 March 2013 Available online March 12 2013 The primary objective of this study is to investigate the effect of growth and financial strength variables on the financial leverage for some listed companies in the Tehran Stock Exchange. For this purpose, a sample of 700 firm-years among listed companies in the Tehran Stock Exchange over the period 2006-2010 was examined. In the present study, the growth variables, including asset growth, profit growth and sales growth; and financial strength calculated by the Altman Z-bankruptcy model have been considered as independent variables. In addition, the ratios of long-term debt to total assets, long-term debt to fixed assets, total long-term debt and short-term receivable facilities to equity capital and total long-term debt and short-term receivable facilities to total assets are used as measures of financial leverage and dependent variables. The results indicate that there is a negative and significant relationship between assets growth and some indexes of financial leverage. There is also a positive and significant relationship between the variables of profit growth, sales growth and financial strength with financial leverage measures. © 2013 Growing Science Ltd. All rights reserved. Keywords: Financial leverage Firm growth Financial strength 1. Introduction Today, one of the discussed instances in economic issues in various communities is economic development and growth discussion. In order to achieve this purpose we need to use appropriate tools and mechanisms to lead funds towards growth and development of production and trade. Management should be able to select comparative growth targets and operate them based on suitable environment of business activities. An important step in the start of firm growth is change in management style. Surely, this change requires professional management tools. Some experts believe that the change point is associated with an early crisis of growth and appropriate and fair handling of crisis is correlated with imposition the growth and changes of company (Davila & Foster, 2005). The