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The behavior of capital structure- evidence from fast calibrated additive quantile regression

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  • Umut UYAR

    (Pamukkale University, Department of Business Administration)

Abstract

In finance, capital structure decisions are crucial due to their impact on the value of a firm. Some theories assert that the value of a firm is irrelevant to those decisions. However, there is a growing literature that criticizes this idea. Those studies are constructed on some modern theories, which are called trade-off theory, agency cost theory, signaling theory, and pecking order theory. This paper investigates the relationship between optimal capital structure and capital structure components. The annual data gathered from 195 firms traded in Borsa Istanbul for the period 2011-2020 is used. The fast calibrated additive quantile regression approach is chosen because of its superior properties. In that method, there is not a strong assumption about the functional form of the relationships between the dependent variable and the explanatory variables. The results indicate that the relationships between the debt ratios and the capital structure components differ for each quantile and these relations are nonlinear. Furthermore, evidence is provided for the fact that the relationships might be explained with the modern theories of capital structure.

Suggested Citation

  • Umut UYAR, 2021. "The behavior of capital structure- evidence from fast calibrated additive quantile regression," Journal of Applied Microeconometrics, Holistence Publications, vol. 1(1), pages 57-71, June.
    • Handle: RePEc:jle:joujam:v:1:y:2021:i:1:p:57-71
    DOI: 10.53753/jame.1.1.05
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    Keywords

    Capital structure; Additive quantile regression; Non-parametric regression; Borsa Istanbul.;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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