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Revisiting Capital Structure of Non-financial Public Firms in Turkey

Author

Listed:
  • Ramazan Karasahin
  • Doruk Kucuksarac

Abstract

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.

Suggested Citation

  • Ramazan Karasahin & Doruk Kucuksarac, 2016. "Revisiting Capital Structure of Non-financial Public Firms in Turkey," Working Papers 1609, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    • Handle: RePEc:tcb:wpaper:1609
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    File URL: https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2016/16-09
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    Citations

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    Cited by:

    1. İbrahim Yarba & Z. Nuray Güner, 2020. "Leverage dynamics: Do financial development and government leverage matter? Evidence from a major developing economy," Empirical Economics, Springer, vol. 59(5), pages 2473-2507, November.
    2. Gülcan Yildirim Güngör & Merve Demirbaş Özbekler & Tuba Pelin Sümer, 2017. "Corporate sector financials from financial stability perspective," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Uses of central balance sheet data offices' information, volume 45, Bank for International Settlements.

    More about this item

    Keywords

    Leverage; Capital structure; Nonfinancal firms;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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