Each firm can use different types of capital structures for an active participation in the competitive market and attracting investors with respect to its economic situation, liquidity and flexibility. This study aimed at investigating the impact of the financial distress on the relationship between long-term investment, cash flows and investment opportunities of companies listed on the Tehran Stock Exchange. Population of the present study encompassed companies listed on the Tehran Stock Exchange over 2008 to 2015 that sample size was 115 firms with respect to the screening method and after the removal of unrelated observations. Financial distress, investment opportunities and cash flows are considered as independent variables in order to determine their impact on firms' investment efficiency (over- and under-investment). In terms of its purpose, this study is considered as an applied research, in terms of content and nature is descriptive-correlation and in terms of research design is post event.
In this study that used the mixed data, the results of firms’ data regression analysis at a 95% confidence level indicated that the financial distress in companies had a direct effect on the relationship between long-term investment and cash flows. The results also showed that the firms’ financial distress had a direct impact on the relationship between long-term investment and investment opportunities.
