Revisiting Capital Structure of Non-financial Public Firms in Turkey

Revisiting Capital Structure of Non-financial Public Firms in Turkey

16/09

March 2016

This study investigates the determinants of capital structure of non-financial public firms quoted in Borsa Istanbul. We explore the effects of firm-specific, industry-specific and macroeconomic variables on book and market leverages by employing panel data. In addition, we study the effects of these variables on short-term and long-term leverage ratios. The results indicate that firm-specific factors have similar effects on both book and market leverage ratios except the effect of growth opportunity. The size of a firm is positively associated with its leverage ratio, particularly with long-term leverage ratio. Tangibility is negatively related to the short-term leverage ratio whereas it is positively related to the long-term leverage ratio. Profitability and liquidity have negative effects on leverage, particularly on short-term leverage ratio. It is also observed that the firms tend to follow their peers in their capital structure decisions. The effect of macroeconomic variables is somewhat more ambiguous. There seems to be positive association between inflation and leverage. On the other hand, firm leverage and economic growth are negatively related. Lastly, recursive panel regression methods show that the evolution of the parameter estimates are stable over time.

Leverage, Capital structure, Nonfinancal firms

G32; G30