This study examines the relationship between managerial risk-taking and the cost of debt in Iranian automotive companies listed on the Tehran Stock Exchange from 2017 to 2023. Managerial risk-taking is proxied by the natural logarithm of the standard deviation of daily stock returns over at least 260 trading days annually. Using panel data from 23 firms (161 firm-year observations) and a multivariate regression model, the results reveal a positive and significant relationship between managerial risk-taking and the cost of debt (β = 0.12, p < 0.001). This finding supports agency theory predictions and indicates that higher managerial risk-taking elevates creditors’ perceived default risk, leading to higher borrowing costs. Conducted in the unique context of a sanctioned emerging market with severe macroeconomic constraints and limited access to global financing, the study extends prior evidence from developed markets to Iran’s strategically important automotive sector and offers practical implications for managers, creditors, and policymakers.
Yassaman Khalili (Fri,) studied this question.