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The Effect of Cash Flow Risk on Capital Structure Decisions

Year 2023, Volume: 7 Issue: 1, 251 - 273, 25.01.2023
https://doi.org/10.25295/fsecon.1158992

Abstract

The purpose of this study is to investigate the effect of cash flow risk on decisions of capital structure in companies included in the BIST 100 Index (excluding financial institutions). In this study, quarterly financial data of 61 companies between the periods of 2004 and 2018 were used. By using panel regression method, in the study a negative correlation between cash flow risk and leverage ratios and profitability ratios, and a positive and statistically meaningful correlation between leverage ratios and Market to Book Value ratio and firm size were found. No statistically significant relationship was found between the leverage ratio and the ratio of tangible assets to total assets and expected inflation. According to the results of the analysis, cash flow risk is one of the determinants of the capital structure and is a factor to be considered in decisions regarding the capital structure. When there is an increase in cash flow risk, firms tend to use less debt, and therefore, the increase in cash flow risk causes a change on decisions of capital structure in favor of equity. As growth opportunities (Market to Book Value ratio) increase, firms borrow more, in other words, they prefer financial debt for financing new investments. Firms prefer financing with equity when there is an increase in profitability ratios, and financing with debt when there is a decrease in profitability ratios. If the size of the firms increases, their debt usage levels of the firms increase.

References

  • Antoniou, A., Güney, Y. & Paudyal, K. (2008). The Determinants of Capital Structure: Capital Market-Oriented Versus Bank Oriented Institutions, Journal of Financial and Quantitative Analysis, 43(1), 59-92.
  • Bastı, E. & Bayyurt, N. (2019). Factors Affecting Capital Structure Choice: New Evidence from Turkish Non-Financial Listed Companies, Journal of Business Economics and Finance, 8(1), 53-70.
  • Başaran, Ü. (2008). İMKB’de İşlem Gören Otomotiv ve Otomotiv Yan Sanayi İşletmelerinin Sermaye Yapısı Kararlarını Etkileyen Faktörlerin Analizi. Yayımlanmamış (Yüksek Lisans Tezi), Zonguldak Karaelmas Üniversitesi Sosyal Bilimler Enstitüsü İşletme Anabilim Dalı, Zonguldak.
  • Bates, T. W., Kahle, K. M. & Stulz, R. M. (2009). Why Do U.S. Firms Hold So Much More Cash than They Used To? The Journal of Finance, 64(5), 1985-2021.
  • Bradley, M., Jarrell, G. & Kim, E. H. (1984). On the Existence of an Optimal Capital Structure: Theory and Evidence, The Journal of Finance, 39(3), 857-878.
  • Chakrabarti, A. & Chakrabarti, A. (2019). The Capital Structure Puzzle – Evidence from Indian Energy Sector, International Journal of Energy Sector Management, 13(1), 1-23.
  • Çıtak, L. & Ersoy, E. (2012). The Determinants of Corporate Debt Ratio: An Empirical Analysis on Turkish Corporations, International Research Journal of Finance and Economics, 95, 151-162.
  • Daniel, N. D., Denis, D. J. & Navee, L. (2008). Sources of Financial Flexibility: Evidence from Cash Flow Shortfalls, Working Paper, Retrieved from https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.719.9112&rep=rep1&type=pdf
  • De Miguel, A. & Pindado, J. (2001). Determinants of Capital Structure: New Evidence from Spanish Panel Data, Journal of Corporate Finance, 7(1), 77-99.
  • Deesomsak, R., Paudyal, K. & Pescetto, G. (2004). The Determinants of Capital Structure: Evidence from the Asia Pacific Region, Journal Multinational Financing Management, 14(4-5), 387–405.
  • Denis, D. J. & McKeon, S. B. (2017). Persistent Operating Losses and Corporate Financial Policies, Working Paper SSRN, Retrieved from http://dx.doi.org/10.2139/ssrn.2881584
  • Driscoll, J. C. & Kraay, A. C. (1998). Consistent Covariance Matrix Estimation with Spatially Dependent Panel Data, Review of Economics and Statistics, 80(4), 549–560.
  • Dudley, E. & James, C. (2014). Cash Flow Volatility and Capital Structure Choice. Working Paper SSRN, Retrieved from http://dx.doi.org/10.2139/ssrn.2492152
  • Dufour, D., Luu, P. & Teller, P. (2018). The Influence of Cash Flow on the Speed of Adjustment to the Optimal Capital Structure, Research in International Business and Finance, 45, 62–71.
  • Erkan, M. & Aydemir, O. (2006). İşletmelerin Finansman Kararları ve Yabancı Kaynak Kullanımı: Türkiye’de Bir Uygulama, Marmara Üniversitesi Muhasebe-Finansman Araştırma ve Uygulama Dergisi, 6(15), 131-139.
  • Frank, M. Z. & Goyal, V. K. (2007). Trade-Off and Pecking Order Theories of Debt, Handbook of Empirical Corporate Finance, 2, 135-202.
  • Frank, M. & Goyal, V. (2009). Capital Structure Decisions: Which Factors are Reliably Important? Financial Management, 38(1), 1–37.
  • Friend, I. & Hasbrouck, J. (1988). Determinants of Capital Structure. In Chen, A. Research in Finance. New York: JAI Press.
  • Friend, I. & Lang, L. H. P. (1988). An Empirical Test of the Impact of Managerial Self-Interest on Corporate Capital Structure, Journal of Finance, 43(2), 271-281.
  • Gaud, P., Jani, E., Hoesli, M. & Bender, A. (2005). The Capital Structure of Swiss Companies: An Empirical Analysis Using Dynamic Panel Data, European Financial Management, 11(1), 1-40.
  • Gujarati, D. (2016). Örneklerle Ekonometri. (N. Bolatoğlu. Çev.) Ankara: BB101 Yayınları.
  • Harris, C. & Roark, S. (2019). Cash Flow Risk and Capital Structure Decisions, Finance Research Letters, 29, 393-397.
  • Keefe, M. O. C. & Yaghoubi, M. (2014). Does Cash Flow Volatility Affect Firm Capital Structure, ACFR Working Paper, Retrieved froom https://acfr.aut.ac.nz/__data/assets/pdf_file/0010/29890/486196-WP-Capital-structure-and-volatility.pdf
  • Keefe, M. O. C. & Yaghoubi, M. (2016). The Influence of Cash Flow Volatility on Capital Structure and the Use of Debt of Different Maturities, Journal of Corporate Finance, 38, 18-36.
  • Kester, C. W. (1986). Capital and Ownership Structure: A Comparison of United States and Japanese Manufacturing Corporations, Financial Management, 15(1), 5-16.
  • Kim, W. S. & Sorensen, E. H. (1986). Evidence on the Impact of the Agency Costs of Debt in Corporate Debt Policy, The Journal of Financial and Quantitative Analysis, 21(2), 131-144.
  • Köksal, B. & Orman, C. (2014). Determinants of Capital Structure: Evidence from a Major Developing Economy, TCMB Working Paper, 14/26, Retrieved from https://www.tcmb.gov.tr/wps/wcm/connect/85eb51ba-0444-4ac5-a52b-d3b11a0fac6b/WP1426.pdf?MOD=AJPERES&CACHEID=85eb51ba-0444-4ac5-a52b-d3b11a0fac6b
  • Mateev, M., Poutziouris, P. & Ivanov, K. (2013). On the Determinants of SME Capital Structure of Eastern and Central Europe-A Dynamic Panel Analysis, Research in International Business and Finance, 27(1), 28–51.
  • Memon, Z. A., Chen, Y., Tauni, M. Z. & Ali, H. (2018). The Impact of Cash Flow Volatility on Firm Leverage and Debt Maturity Structure: Evidence from China, China Finance Review International, 8(1), 69-91.
  • Mira, F. S. & Gracia, J. L. (2003). Pecking Order Versus Trade-Off: An Empirical Approach to the Small and Medium Enterprise Capital Structure, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) Working Paper, WP-EC 2003-9, Retrieved from https://www.researchgate.net/publication/28071232_Pecking_Order_Versus_Trade-off_An_Empirical_Approach_to_the_Small_and_Medium_Enterprise_Capital_Structure
  • Myers, S. (1984). The Capital Structure Puzzle, Journal of Finance, 39(3), 575–592.
  • Panda, A. K. & Nanda, S. (2019). Determinants of Capital Structure; A Sector-Level Analysis for Indian Manufacturing Firms, International Journal of Productivity and Performance Management, 69(5), 1033-1060.
  • Proença, P., Laureano, R. M. S. & Laureano, L. M. S. (2014). Determinants of Capital Structure and the 2008 Financial Crisis: Evidence from Portuguese SMEs, Social and Behavioral Sciences, 150, 182-191.
  • Rajan, R. & Zingales, L. (1995). What Do We Know About Capital Structure Choice? Some Evidence from International Data, Journal of Finance, 50, 1421–1460.
  • Santosuosso, P. (2015). How Cash Flow Volatility Affects Debt Financing and Accounts Payable, International Journal of Economics and Finance, 7(8), 138- 145.
  • Shenoy, C. & Koch, P. D. (1996). The Firm’s Leverage-Cash Flow Relationship, Journal of Empirical Finance, 2(4), 307-331.
  • Titman, S. & Wessels, R. (1988). The Determinants of Capital Structure Choice, The Journal of Finance, 43(1), 1-19.
  • Yıldırım, R., Masih, M. & Bacha, O. L. (2018). Determinants of Capital Structure: Evidence from Shari'ah Compliant and Non-Compliant Firms, Pacific-Basin Finance Journal, 51, 198-219.

Nakit Akış Riskinin Sermaye Yapısı Kararlarına Etkisi

Year 2023, Volume: 7 Issue: 1, 251 - 273, 25.01.2023
https://doi.org/10.25295/fsecon.1158992

Abstract

Bu çalışmanın amacı, BIST 100 Endeksi’nde yer alan işletmelerde (finansal kuruluşlar hariç) nakit akış riskinin sermaye yapısı kararları üzerine etkisini araştırmaktır. 2004-2018 döneminde 61 işletmenin çeyrek dönemlik mali tablo verileri kullanılmıştır. Panel regresyon yönteminin kullanıldığı çalışmada, kaldıraç oranı ile nakit akış riski ve karlılık oranı arasında negatif yönde, kaldıraç oranı ile Piyasa Değeri/Defter Değeri oranı ve firma büyüklüğü arasında ise pozitif yönde ve istatistiksel olarak anlamlı bir ilişki bulunmuştur. Kaldıraç oranı ile maddi duran varlıkların toplam varlıklara oranı ve beklenen enflasyon arasında istatistiksel olarak anlamlı bir ilişki bulunamamıştır. Analiz sonuçlarına göre, nakit akış riski sermaye yapısının belirleyicilerinden biridir ve sermaye yapısına ilişkin kararlarda dikkate alınması gereken bir faktördür. Nakit akış riskinde bir artış yaşandığında işletmeler daha az borç kullanma eğiliminde olmaktadır ve dolayısıyla nakit akış riskindeki artış sermaye yapısı kararlarında özkaynaklar lehine değişime yol açmaktadır. Büyüme fırsatları (Piyasa Değeri/Defter Değeri oranı) arttıkça, işletmeler daha fazla borçlanmaktadır, diğer bir ifadeyle yeni yatırımların finansmanında borçla finansmanı tercih etmektedirler. İşletmeler, karlılık oranlarında yükseliş olduğunda öz kaynak ile finansmanı, karlılık oranında düşüş olduğunda ise borçla finansmanı tercih etmektedir. Firma büyüklüğünün artması halinde, işletmelerin borç kullanım düzeyleri yükselmektedir.

References

  • Antoniou, A., Güney, Y. & Paudyal, K. (2008). The Determinants of Capital Structure: Capital Market-Oriented Versus Bank Oriented Institutions, Journal of Financial and Quantitative Analysis, 43(1), 59-92.
  • Bastı, E. & Bayyurt, N. (2019). Factors Affecting Capital Structure Choice: New Evidence from Turkish Non-Financial Listed Companies, Journal of Business Economics and Finance, 8(1), 53-70.
  • Başaran, Ü. (2008). İMKB’de İşlem Gören Otomotiv ve Otomotiv Yan Sanayi İşletmelerinin Sermaye Yapısı Kararlarını Etkileyen Faktörlerin Analizi. Yayımlanmamış (Yüksek Lisans Tezi), Zonguldak Karaelmas Üniversitesi Sosyal Bilimler Enstitüsü İşletme Anabilim Dalı, Zonguldak.
  • Bates, T. W., Kahle, K. M. & Stulz, R. M. (2009). Why Do U.S. Firms Hold So Much More Cash than They Used To? The Journal of Finance, 64(5), 1985-2021.
  • Bradley, M., Jarrell, G. & Kim, E. H. (1984). On the Existence of an Optimal Capital Structure: Theory and Evidence, The Journal of Finance, 39(3), 857-878.
  • Chakrabarti, A. & Chakrabarti, A. (2019). The Capital Structure Puzzle – Evidence from Indian Energy Sector, International Journal of Energy Sector Management, 13(1), 1-23.
  • Çıtak, L. & Ersoy, E. (2012). The Determinants of Corporate Debt Ratio: An Empirical Analysis on Turkish Corporations, International Research Journal of Finance and Economics, 95, 151-162.
  • Daniel, N. D., Denis, D. J. & Navee, L. (2008). Sources of Financial Flexibility: Evidence from Cash Flow Shortfalls, Working Paper, Retrieved from https://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.719.9112&rep=rep1&type=pdf
  • De Miguel, A. & Pindado, J. (2001). Determinants of Capital Structure: New Evidence from Spanish Panel Data, Journal of Corporate Finance, 7(1), 77-99.
  • Deesomsak, R., Paudyal, K. & Pescetto, G. (2004). The Determinants of Capital Structure: Evidence from the Asia Pacific Region, Journal Multinational Financing Management, 14(4-5), 387–405.
  • Denis, D. J. & McKeon, S. B. (2017). Persistent Operating Losses and Corporate Financial Policies, Working Paper SSRN, Retrieved from http://dx.doi.org/10.2139/ssrn.2881584
  • Driscoll, J. C. & Kraay, A. C. (1998). Consistent Covariance Matrix Estimation with Spatially Dependent Panel Data, Review of Economics and Statistics, 80(4), 549–560.
  • Dudley, E. & James, C. (2014). Cash Flow Volatility and Capital Structure Choice. Working Paper SSRN, Retrieved from http://dx.doi.org/10.2139/ssrn.2492152
  • Dufour, D., Luu, P. & Teller, P. (2018). The Influence of Cash Flow on the Speed of Adjustment to the Optimal Capital Structure, Research in International Business and Finance, 45, 62–71.
  • Erkan, M. & Aydemir, O. (2006). İşletmelerin Finansman Kararları ve Yabancı Kaynak Kullanımı: Türkiye’de Bir Uygulama, Marmara Üniversitesi Muhasebe-Finansman Araştırma ve Uygulama Dergisi, 6(15), 131-139.
  • Frank, M. Z. & Goyal, V. K. (2007). Trade-Off and Pecking Order Theories of Debt, Handbook of Empirical Corporate Finance, 2, 135-202.
  • Frank, M. & Goyal, V. (2009). Capital Structure Decisions: Which Factors are Reliably Important? Financial Management, 38(1), 1–37.
  • Friend, I. & Hasbrouck, J. (1988). Determinants of Capital Structure. In Chen, A. Research in Finance. New York: JAI Press.
  • Friend, I. & Lang, L. H. P. (1988). An Empirical Test of the Impact of Managerial Self-Interest on Corporate Capital Structure, Journal of Finance, 43(2), 271-281.
  • Gaud, P., Jani, E., Hoesli, M. & Bender, A. (2005). The Capital Structure of Swiss Companies: An Empirical Analysis Using Dynamic Panel Data, European Financial Management, 11(1), 1-40.
  • Gujarati, D. (2016). Örneklerle Ekonometri. (N. Bolatoğlu. Çev.) Ankara: BB101 Yayınları.
  • Harris, C. & Roark, S. (2019). Cash Flow Risk and Capital Structure Decisions, Finance Research Letters, 29, 393-397.
  • Keefe, M. O. C. & Yaghoubi, M. (2014). Does Cash Flow Volatility Affect Firm Capital Structure, ACFR Working Paper, Retrieved froom https://acfr.aut.ac.nz/__data/assets/pdf_file/0010/29890/486196-WP-Capital-structure-and-volatility.pdf
  • Keefe, M. O. C. & Yaghoubi, M. (2016). The Influence of Cash Flow Volatility on Capital Structure and the Use of Debt of Different Maturities, Journal of Corporate Finance, 38, 18-36.
  • Kester, C. W. (1986). Capital and Ownership Structure: A Comparison of United States and Japanese Manufacturing Corporations, Financial Management, 15(1), 5-16.
  • Kim, W. S. & Sorensen, E. H. (1986). Evidence on the Impact of the Agency Costs of Debt in Corporate Debt Policy, The Journal of Financial and Quantitative Analysis, 21(2), 131-144.
  • Köksal, B. & Orman, C. (2014). Determinants of Capital Structure: Evidence from a Major Developing Economy, TCMB Working Paper, 14/26, Retrieved from https://www.tcmb.gov.tr/wps/wcm/connect/85eb51ba-0444-4ac5-a52b-d3b11a0fac6b/WP1426.pdf?MOD=AJPERES&CACHEID=85eb51ba-0444-4ac5-a52b-d3b11a0fac6b
  • Mateev, M., Poutziouris, P. & Ivanov, K. (2013). On the Determinants of SME Capital Structure of Eastern and Central Europe-A Dynamic Panel Analysis, Research in International Business and Finance, 27(1), 28–51.
  • Memon, Z. A., Chen, Y., Tauni, M. Z. & Ali, H. (2018). The Impact of Cash Flow Volatility on Firm Leverage and Debt Maturity Structure: Evidence from China, China Finance Review International, 8(1), 69-91.
  • Mira, F. S. & Gracia, J. L. (2003). Pecking Order Versus Trade-Off: An Empirical Approach to the Small and Medium Enterprise Capital Structure, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) Working Paper, WP-EC 2003-9, Retrieved from https://www.researchgate.net/publication/28071232_Pecking_Order_Versus_Trade-off_An_Empirical_Approach_to_the_Small_and_Medium_Enterprise_Capital_Structure
  • Myers, S. (1984). The Capital Structure Puzzle, Journal of Finance, 39(3), 575–592.
  • Panda, A. K. & Nanda, S. (2019). Determinants of Capital Structure; A Sector-Level Analysis for Indian Manufacturing Firms, International Journal of Productivity and Performance Management, 69(5), 1033-1060.
  • Proença, P., Laureano, R. M. S. & Laureano, L. M. S. (2014). Determinants of Capital Structure and the 2008 Financial Crisis: Evidence from Portuguese SMEs, Social and Behavioral Sciences, 150, 182-191.
  • Rajan, R. & Zingales, L. (1995). What Do We Know About Capital Structure Choice? Some Evidence from International Data, Journal of Finance, 50, 1421–1460.
  • Santosuosso, P. (2015). How Cash Flow Volatility Affects Debt Financing and Accounts Payable, International Journal of Economics and Finance, 7(8), 138- 145.
  • Shenoy, C. & Koch, P. D. (1996). The Firm’s Leverage-Cash Flow Relationship, Journal of Empirical Finance, 2(4), 307-331.
  • Titman, S. & Wessels, R. (1988). The Determinants of Capital Structure Choice, The Journal of Finance, 43(1), 1-19.
  • Yıldırım, R., Masih, M. & Bacha, O. L. (2018). Determinants of Capital Structure: Evidence from Shari'ah Compliant and Non-Compliant Firms, Pacific-Basin Finance Journal, 51, 198-219.
There are 38 citations in total.

Details

Primary Language Turkish
Subjects Business Administration
Journal Section Articles
Authors

Mehmet Akarçay 0000-0003-1933-3510

Ersan Ersoy 0000-0003-4079-2834

Publication Date January 25, 2023
Published in Issue Year 2023 Volume: 7 Issue: 1

Cite

APA Akarçay, M., & Ersoy, E. (2023). Nakit Akış Riskinin Sermaye Yapısı Kararlarına Etkisi. Fiscaoeconomia, 7(1), 251-273. https://doi.org/10.25295/fsecon.1158992

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