THE EFFECT OF CAPITAL STRUCTURE ON THE VALUE OF FIRM. A STUDY OF TURKEY NON-METAL MINERAL PRODUCTS INDEX

Abstract

Purpose - This study aims to examine the effect of capital structure on firm specific variables such as stock performance, growth, profitability. The study also aims to investigate relationship between GDP, inflation and capital structure of firms in a macro view.

Methodology - To apply our study, we use eight main companies of Turkey Non-Metal Mineral Products Index which are carrying out its operations in cement industry. To represent firm value, growth and, profitability, we use stock price, sales and EBITDA margin, respectively. We retrieve our data from Rasyonet on a quarterly basis from 2000 to 2018.

Findings - Our regression analysis shows that leverage generally does not have any significant relationship with examined variables. Also, we could not find any relationship with debt ratio and inflation for our companies.

Conclusion- Investment purpose debt increase is mostly observed in recent years, so it takes time to see result of it.

Keywords

• Capital structure,Debt ratio,Turkey Non-Metal Mineral Products Index

References

1. Myers, S. Clay (1984). Capital structure puzzle. The Journal of Finance. 39(3): 575-592.
2. Titman, S., & Wessels, R. (1988). The determinants of capital structure choice. The Journal of Finance. 43(1): 1-19. DOI: 10.2307/2328319
3. Harris, M., & Raviv, A. (1991). The Theory of Capital Structure. The Journal of Finance. 46(1): 297-355. DOI: 10.2307/2328697
4. Booth, L., & Aivazian, V., & Kunt, A., & Maksimovic, V. (2001). Capital structures in developing countries. The Journal of Finance 56(1): 87-130.
5. B. Hatfield, Gay, & Cheng, Louis, & N. Davidson, Wallace. (1994). The determination of optimal capital structure: the effect of firm and industry debt ratios on market value. Journal of Financial and Strategic Decisions. 7(3):1-14.
6. Menon, U. Vidhyasagara (2016). Impact of capital structure on stock prices: evidence from Oman. International Journal of Economics and Finance. 8(9): 249-257. DOI: 10.5539/ijef.v8n9p249
7. Chen, A. H. and Boness, A. J. (1975). Effects of uncertain inflation on the investment and financing decisions of a firm. The Journal of Finance, 30: 469-483. DOI: 10.1111/j.1540-6261.1975.tb01823.x
8. Masulis, R. W. (1983). The Impact of capital structure change on firm value: some estimates. The Journal of Finance, 38: 107-126. DOI: 10.1111/j.1540-6261.1983.tb03629.x

9. Modigliani, F. and Miller M. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 48(3): 261-297.
10. Dincergok, B. (2017). The effect of firm size on capital structure decisions: an application on bist manufacturing sector firms. İşletme Araştırma Dergisi, 9(3): 89-109. DOI: 10.20491/isarder.2017.263
11. Korajczyk, Robert A. and Levy, A. (2002). Capital structure choice: macroeconomic conditions and financial constraints. AFA 2002 Atlanta Meetings; Kellogg School of Mgmt. Finance Working Paper No. 279. Available at http://dx.doi.org/10.2139/ssrn.281430
12. Soedarsa H., and Arika P. (2015) The influence of inflation, gdp growth, size, leverage, and profitability towards stock price on property and real estate companies listed in Indonesia stock exchange period 2005-2013. 3rd International Multidiciplinary Conference on Social Sciences 2015. Conference Paper. ISSN 2460-0598
13. Mahmud, M., & Qayyum, A. (2003). The Relationship between Economic Growth and Capital Structure of Listed Companies: Evidence of Japan, Malaysia, and Pakistan [with Comments]. The Pakistan Development Review, 42(4), 727-750. Retrieved from http://www.jstor.org/stable/41260433