Testing the pecking order model of corporate leverage: An empirical investigation of Turkish firms

Year 2019, , 8 - 15, 01.01.2019

İsmail Kalash

https://doi.org/10.24289/ijsser.478243

Cited By: 2

Abstract

This research
investigates the pecking order model of corporate leverage for a sample of 53
Turkish industrial firms listed on Istanbul stock exchange during the period
from 2008 to 2017. The study tries to concentrate on the predictions about how
corporate leverage varies with investments, profitability, risk, firm size and
tangibility. The coefficients of corporate leverage determinants are estimated
by using Ordinary Least Squares and Binary Logistic regressions. Confirming the
pecking order model, it is found that firms prefer to use internal cash flows
over external financing to fund investments. Moreover, the empirical results
also show that more profitable and risky firms tend to borrow less. On the
other hand, firms with more investments and larger firms tend to have more
leverage. The findings of this study will help the managers to design a better
strategy about capital structure which can maximize firm’s performance.

Keywords

Pecking Order Model, Leverage, Turkish Firms

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