Dynamics of conservative financing policy: An empirical analysis on listed Turkish firms

Year 2025, Volume: 8 Issue: 1, 19 - 34, 10.03.2025

Gülşen Özkan , Özge Sezgin Alp , Güray Küçükkocaoğlu

https://doi.org/10.58308/bemarej.1606692

Abstract

DDespite being in operation for roughly forty years, Turkish stock market is an emerging market with a limited number of listed firms mostly controlled by a family or a business group. The analysis regarding non-financial firms listed on Borsa Istanbul over the fifteen-year period indicates that the vast majority of these firms are reluctant to debt financing, and a remarkable rate of them exhibit a conservative financing bias. However, this behaviour has been ignored in previous researches since the focus was primarily on capital structure and its determinants. Besides, prior studies on conservative financing policy broadly deal with the issue by investigating the financing behaviour of the firms from advanced economies, especially the UK and the US. In this regard, this paper aims to provide a new perspective to the debates on conservative policy by presenting evidences from an emerging economy that experiences frequent crises. The results indicate that cash reserves, cash flows, dividends and ownership concentration have a strong impact on adopting a conservative policy for Turkish firms. The cash flows and dividends also play an important role in maintaining this policy. However, contrary to common findings, macroeconomic conditions do not appear to have a direct impact on it.

Keywords

Conservative financing policy, capital structure, ownership concentration

Ethical Statement

Bu çalışmanın tüm hazırlanma süreçlerinde etik kurallara ve bilimsel atıf gösterme ilkelerine riayet edilmiş olup, etik kurul izni gerektiren bir husus bulunmamaktadır. Çalışmada kullanılan veriler istenmesi halinde sorumlu yazar tarafından gönderilecektir.

Supporting Institution

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Dynamics of conservative financing policy: An empirical analysis on listed Turkish firms

Abstract

Despite being in operation for roughly forty years, Turkish stock market is an emerging market with a limited number of listed firms. Additionally, most of them are controlled by a family or a business group where families are the major shareholders again. Moreover, the analysis regarding non-financial firms listed on Borsa Istanbul over the fifteen-year period indicates that the vast majority of these firms are reluctant to debt financing, and a remarkable rate of them exhibit a conservative financing bias. However, this behaviour has been ignored in previous researches since the focus was primarily on capital structure and its determinants. In this regard, this study focuses on the main determinants of this conservative tendency in the light of main capital structure theories. Besides, prior studies on conservative financing policy broadly deal with the issue by investigating the financing behaviour of the firms from advanced economies, especially the UK and the US. In this context, this paper also aims to provide a new perspective to the debates on conservative policy by presenting evidences from an emerging economy that experiences frequent crises. The results indicate that cash reserves, cash flows, dividends and ownership concentration have a positive and strong impact on adopting a conservative debt policy for Turkish firms, while growth opportunities and size have opposite effects. The cash flows and dividends also play an important role in maintaining this policy. However, contrary to common findings, macroeconomic conditions do not appear to have a direct impact on it.

Keywords

Conservative financing policy, capital structure, ownership concentration

Ethical Statement

Bu çalışmanın tüm hazırlanma süreçlerinde etik kurallara ve bilimsel atıf gösterme ilkelerine riayet edilmiş olup, etik kurul iznini gerektiren bir husus bulunmamaktadır. Çalışmada kullanılan verilen ihtiyaç duyulması halinde sorumlu yazar tarafından gönderilecektir.

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