Research Article
BibTex RIS Cite

FACTORS AFFECTING CAPITAL STRUCTURE CHOICE: NEW EVIDENCE FROM TURKISH NON-FINANCIAL LISTED COMPANIES

Year 2019, Volume: 8 Issue: 1, 53 - 70, 30.03.2019

Eyup Basti Nizamettin Bayyurt

https://doi.org/10.17261/Pressacademia.2019.1015

Abstract

Purpose - Factors affecting capital structure choices of Turkish non-financial listed companies are tested in this study. We investigate the relation between firm leverage and firm level variables, expected inflation and GDP growth rates.
Methodology - We used annual data of exchange listed non-financial corporations in addition to expected inflation and GDP growth rates. We applied panel regression models to our panel data set of 292 firms.
Findings - We found four factors, i.e. profitability, growth (MVA/BVA), tangibility and industry median leverage are effective in explaining capital structures of Turkish listed firms. While profitability and growth have signs in line with the prediction of the pecking order theory, signs of tangibility and industry median leverage favor the trade off theory. We also divided our sample into clusters based on firm size and 2000 – 2001 financial crisis and repeated the analysis.
Conclusion- Results of this analysis suggest that trade off theory explains better the financing behavior of large-sized firms. Pecking order theory seems to better account for financing behaviors of Turkish firms before 2002; and trade off theory seems to explain better their capital structure choices after the 2000 – 2001 financial crisis.

Keywords

Trade off theory pecking order theory firm leverage non-financial firms Turkey

References

  • Acaravcı, S. K. (2014). The determinants of capital structure: Evidence from the Turkish manufacturing sector. International Journal of Economics and Financial Issues, 5(1), pp.158-171.
  • Asterious, D. (2006). Applied econometrics: A modern approach using Eviews and Microfit. Palgrave Macmillan.
  • Bayrakdaroglu, A., Ege, I., Yazici, N. (2013). A panel data analysis of capital structure determinants: empirical results from Turkish capital market. International Journal of Economics and Finance, 5(4), pp.131-140.
  • Borsa Istanbul Daily Bulletin (online). (December 31, 2014). Available at: http://borsaistanbul.com/en/data/data/equity-market-data/bulletin-data.[Accesed in April 2015].
  • Brealey, R. A., Myers, S. C., Marcus, A. J. (2009). Fundamentals of corporate finance, Sixth Edition, McGraw-Hill.
  • Bradley, M., Jarrell, G. A., Kim, E. (1984). On the existence of an optimal capital structure: theory and evidence. The Journal of Finance, 39(3), pp.857-878.
  • Capital Markets Board of Turkey, Monthly Statistics Bulletin. (December 2014). Available at: http://www.spk.gov.tr/apps/aylikbulten/index.aspx?submenuheader=-1. [Accesed in May 2015].
  • Chen, D. H., Chen, C. D., Chen, J., Huang, Y. F. (2013). Panel data analyses of the pecking order theory and the market timing theory of capital structure in Taiwan. International Review of Economics & Finance, 27, pp.1-13.
  • Demirhan, D. (2009). Sermaye yapisini etkileyen firmaya özgü faktörlerin analizi: IMKB hizmet firmalari uzerine bir uygulama. Ege Academic Review,9(2), pp.677-697.
  • Fischer, E. O., Heinkel, R., Zechner, J. (1989). Dynamic capital structure choice: Theory and tests. The Journal of Finance, 44(1), pp.19-40.
  • Frank, M. Z., Goyal, V. K. (2003). Testing the pecking order theory of capital structure. Journal of Financial Economics, 67(2), pp.217-248.
  • Frank, M. Z., Goyal, V. K. (2007). Trade-off and pecking order theories of debt. Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=670543. [Accesed in February 2015].
  • Frank, M. Z., Goyal, V. K. (2009). Capital structure decisions: which factors are reliably important?. Financial Management, 38(1), pp.1-37.
  • Frydenberg, S. (2004). Determinants of corporate capital structure of Norwegian manufacturing firms. Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=556634. [Accesed in February 2015].
  • Gönenç, H. (2003). Capital structure decisions under micro institutional settings: the case of Turkey. Journal of Emerging Market Finance, 2(1), pp.57-82.
  • Gülşen, A. Z., Ülkütaş, Ö. (2012). Sermaye yapisinin belirlenmesinde finansman hiyerarşisi teorisi ve ödünleşme teorisi: İMKB sanayi endeksinde yer alan firmalar üzerine bir uygulama. Uluslararası Yönetim İktisat ve İşletme Dergisi, 8(15), pp.49-59.
  • Harris, M., Raviv, A. (1991). The theory of capital structure. The Journal of Finance, 46(1), pp.297-355.
  • Hausman, J. (1978). Specification tests in econometrics. Econometrica, 46, pp.1251–1271.
  • Ho, O. C. (2004). Determinants of foreign direct investment in China: a sectoral analysis. Department of Economics, University of Western Australia.Available at: http://www.web.uwa.edu.au/__data/assets/pdf_file/0019/102556/04_18_Ho.pdf. [Accesed in April 2015].
  • Korajczyk, R. A., Levy, A. (2003). Capital structure choice: macroeconomic conditions and financial constraints. Journal of Financial Economics, 68(1), pp.75-109.
  • Korkmaz, T., Albayrak, A. S., Karataş, A. (2007). Hisse senetleri İMKB’de işlem gören KOBİ’lerin sermaye yapisinin incelenmesi: 1997–2004 dönemi. Iktisat Isletme ve Finans, 22(253), pp.79-96.
  • Köksal, B., Orman, C., Oduncu, A. (2013). Determinants of capital structure: evidence from a major emerging market economy. Working Paper. Available at: http://ssrn.com/abstract=2212648. [Accesed in March 2015].
  • Kraus, A., Litzenberger, R. H. (1973). A state-preference model of optimal financial leverage. The Journal of Finance, 28(4), pp.911-922.
  • MacKie-Mason, J. K. (1990). Do taxes affect corporate financing decisions?. The Journal of Finance, 45(5), pp.1471-1493.
  • Modigliani, F., Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 48(3), pp.261-297.
  • Modigliani, F., Miller, M. H. (1963). Corporate income taxes and the cost of capital: a correction. The American Economic Review, 53(3), pp.433-443.
  • Myers, S. C. (1984). The capital structure puzzle. The Journal of Finance, 39(3), pp.574-592.
  • Myers, S. C. (2001). Capital structure. Journal of Economic Perspectives, 15(2), pp.81-102.
  • Myers, S. C., Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), pp.187-221.
  • Myers, S. C., Read Jr, J. A. (2012). Real options, taxes and financial leverage (No. w18148). National Bureau of Economic Research. Available at: http://www.nber.org/papers/w18148.pdf. [Accesed in June 2015].
  • Sayılgan, G., Karabacak, H., Küçükkocaoğlu, G. (2006). The firm-specific determinants of corporate capital structure: evidence from Turkish panel data. Investment Management and Financial Innovations, 3(3), pp.125-139.
  • Schoubben, F., Van Hulle, C. (2004). The determinants of leverage; differences between quoted and non-quoted firms. DTEW Research Report, 0450, pp.1-32.
  • Shyam-Sunder, L., Myers, S. C. (1999). Testing static tradeoff against pecking order models of capital structure. Journal of Financial Economics, 51(2), pp.219-244.
  • Titman, S., Wessels, R. (1988). The determinants of capital structure choice. The Journal of Finance, 43(1), pp.1-19.
  • Tong, G., Green, C. J. (2005). Pecking order or trade-off hypothesis? evidence on the capital structure of Chinese companies. Applied Economics,37(19), pp.2179-2189.
  • World Federation of Exchanges Website. http://www.world-exchanges.org/statistics/monthly-reports, April 18, 2015. [Accesed in January 2015].
  • Yıldız, M. E., Yalama, A., Sevil, G. (2009). Sermaye yapisi teorilerinin geçerliliğinin test edilmesi: panel veri analizi kullanilarak İMKB-imalat sektörü üzerinde ampirik bir uygulama. Iktisat Isletme ve Finans, 24(278), pp.25-45.
  • The World Bank Website. http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG. [Accesed in January 2015].
  • Turkish Statistical Institute Website. http://www.tuik.gov.tr/PreTablo.do?alt_id=1014. [Accesed in January 2015].
  • Central Bank of Republic of the Turkey, Electronic Data Delivery System. http://evds.tcmb.gov.tr/. [Accesed in January 2015].

Year 2019, Volume: 8 Issue: 1, 53 - 70, 30.03.2019

Eyup Basti Nizamettin Bayyurt

https://doi.org/10.17261/Pressacademia.2019.1015

Abstract

References

  • Acaravcı, S. K. (2014). The determinants of capital structure: Evidence from the Turkish manufacturing sector. International Journal of Economics and Financial Issues, 5(1), pp.158-171.
  • Asterious, D. (2006). Applied econometrics: A modern approach using Eviews and Microfit. Palgrave Macmillan.
  • Bayrakdaroglu, A., Ege, I., Yazici, N. (2013). A panel data analysis of capital structure determinants: empirical results from Turkish capital market. International Journal of Economics and Finance, 5(4), pp.131-140.
  • Borsa Istanbul Daily Bulletin (online). (December 31, 2014). Available at: http://borsaistanbul.com/en/data/data/equity-market-data/bulletin-data.[Accesed in April 2015].
  • Brealey, R. A., Myers, S. C., Marcus, A. J. (2009). Fundamentals of corporate finance, Sixth Edition, McGraw-Hill.
  • Bradley, M., Jarrell, G. A., Kim, E. (1984). On the existence of an optimal capital structure: theory and evidence. The Journal of Finance, 39(3), pp.857-878.
  • Capital Markets Board of Turkey, Monthly Statistics Bulletin. (December 2014). Available at: http://www.spk.gov.tr/apps/aylikbulten/index.aspx?submenuheader=-1. [Accesed in May 2015].
  • Chen, D. H., Chen, C. D., Chen, J., Huang, Y. F. (2013). Panel data analyses of the pecking order theory and the market timing theory of capital structure in Taiwan. International Review of Economics & Finance, 27, pp.1-13.
  • Demirhan, D. (2009). Sermaye yapisini etkileyen firmaya özgü faktörlerin analizi: IMKB hizmet firmalari uzerine bir uygulama. Ege Academic Review,9(2), pp.677-697.
  • Fischer, E. O., Heinkel, R., Zechner, J. (1989). Dynamic capital structure choice: Theory and tests. The Journal of Finance, 44(1), pp.19-40.
  • Frank, M. Z., Goyal, V. K. (2003). Testing the pecking order theory of capital structure. Journal of Financial Economics, 67(2), pp.217-248.
  • Frank, M. Z., Goyal, V. K. (2007). Trade-off and pecking order theories of debt. Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=670543. [Accesed in February 2015].
  • Frank, M. Z., Goyal, V. K. (2009). Capital structure decisions: which factors are reliably important?. Financial Management, 38(1), pp.1-37.
  • Frydenberg, S. (2004). Determinants of corporate capital structure of Norwegian manufacturing firms. Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=556634. [Accesed in February 2015].
  • Gönenç, H. (2003). Capital structure decisions under micro institutional settings: the case of Turkey. Journal of Emerging Market Finance, 2(1), pp.57-82.
  • Gülşen, A. Z., Ülkütaş, Ö. (2012). Sermaye yapisinin belirlenmesinde finansman hiyerarşisi teorisi ve ödünleşme teorisi: İMKB sanayi endeksinde yer alan firmalar üzerine bir uygulama. Uluslararası Yönetim İktisat ve İşletme Dergisi, 8(15), pp.49-59.
  • Harris, M., Raviv, A. (1991). The theory of capital structure. The Journal of Finance, 46(1), pp.297-355.
  • Hausman, J. (1978). Specification tests in econometrics. Econometrica, 46, pp.1251–1271.
  • Ho, O. C. (2004). Determinants of foreign direct investment in China: a sectoral analysis. Department of Economics, University of Western Australia.Available at: http://www.web.uwa.edu.au/__data/assets/pdf_file/0019/102556/04_18_Ho.pdf. [Accesed in April 2015].
  • Korajczyk, R. A., Levy, A. (2003). Capital structure choice: macroeconomic conditions and financial constraints. Journal of Financial Economics, 68(1), pp.75-109.
  • Korkmaz, T., Albayrak, A. S., Karataş, A. (2007). Hisse senetleri İMKB’de işlem gören KOBİ’lerin sermaye yapisinin incelenmesi: 1997–2004 dönemi. Iktisat Isletme ve Finans, 22(253), pp.79-96.
  • Köksal, B., Orman, C., Oduncu, A. (2013). Determinants of capital structure: evidence from a major emerging market economy. Working Paper. Available at: http://ssrn.com/abstract=2212648. [Accesed in March 2015].
  • Kraus, A., Litzenberger, R. H. (1973). A state-preference model of optimal financial leverage. The Journal of Finance, 28(4), pp.911-922.
  • MacKie-Mason, J. K. (1990). Do taxes affect corporate financing decisions?. The Journal of Finance, 45(5), pp.1471-1493.
  • Modigliani, F., Miller, M. H. (1958). The cost of capital, corporation finance and the theory of investment. The American Economic Review, 48(3), pp.261-297.
  • Modigliani, F., Miller, M. H. (1963). Corporate income taxes and the cost of capital: a correction. The American Economic Review, 53(3), pp.433-443.
  • Myers, S. C. (1984). The capital structure puzzle. The Journal of Finance, 39(3), pp.574-592.
  • Myers, S. C. (2001). Capital structure. Journal of Economic Perspectives, 15(2), pp.81-102.
  • Myers, S. C., Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), pp.187-221.
  • Myers, S. C., Read Jr, J. A. (2012). Real options, taxes and financial leverage (No. w18148). National Bureau of Economic Research. Available at: http://www.nber.org/papers/w18148.pdf. [Accesed in June 2015].
  • Sayılgan, G., Karabacak, H., Küçükkocaoğlu, G. (2006). The firm-specific determinants of corporate capital structure: evidence from Turkish panel data. Investment Management and Financial Innovations, 3(3), pp.125-139.
  • Schoubben, F., Van Hulle, C. (2004). The determinants of leverage; differences between quoted and non-quoted firms. DTEW Research Report, 0450, pp.1-32.
  • Shyam-Sunder, L., Myers, S. C. (1999). Testing static tradeoff against pecking order models of capital structure. Journal of Financial Economics, 51(2), pp.219-244.
  • Titman, S., Wessels, R. (1988). The determinants of capital structure choice. The Journal of Finance, 43(1), pp.1-19.
  • Tong, G., Green, C. J. (2005). Pecking order or trade-off hypothesis? evidence on the capital structure of Chinese companies. Applied Economics,37(19), pp.2179-2189.
  • World Federation of Exchanges Website. http://www.world-exchanges.org/statistics/monthly-reports, April 18, 2015. [Accesed in January 2015].
  • Yıldız, M. E., Yalama, A., Sevil, G. (2009). Sermaye yapisi teorilerinin geçerliliğinin test edilmesi: panel veri analizi kullanilarak İMKB-imalat sektörü üzerinde ampirik bir uygulama. Iktisat Isletme ve Finans, 24(278), pp.25-45.
  • The World Bank Website. http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG. [Accesed in January 2015].
  • Turkish Statistical Institute Website. http://www.tuik.gov.tr/PreTablo.do?alt_id=1014. [Accesed in January 2015].
  • Central Bank of Republic of the Turkey, Electronic Data Delivery System. http://evds.tcmb.gov.tr/. [Accesed in January 2015].
There are 40 citations in total.

Details

Primary Language English
Subjects Economics, Behaviour-Personality Assessment in Psychology, Finance, Business Administration
Journal Section Articles
Authors

Eyup Basti This is me 0000-0003-2280-4221

Nizamettin Bayyurt 0000-0001-6993-4715

Publication Date March 30, 2019
Published in Issue Year 2019 Volume: 8 Issue: 1

Cite

APA Basti, 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. https://doi.org/10.17261/Pressacademia.2019.1015

Journal of Business, Economics and Finance (JBEF) is a scientific, academic, double blind peer-reviewed, quarterly and open-access journal. The publication language is English. The journal publishes four issues a year. The issuing months are March, June, September and December. The journal aims to provide a research source for all practitioners, policy makers and researchers working in the areas of business, economics and finance. The Editor of JBEF invites all manuscripts that that cover theoretical and/or applied researches on topics related to the interest areas of the Journal. JBEF charges no submission or publication fee.



Ethics Policy - JBEF applies the standards of Committee on Publication Ethics (COPE). JBEF is committed to the academic community ensuring ethics and quality of manuscripts in publications. Plagiarism is strictly forbidden and the manuscripts found to be plagiarized will not be accepted or if published will be removed from the publication. Authors must certify that their manuscripts are their original work. Plagiarism, duplicate, data fabrication and redundant publications are forbidden. The manuscripts are subject to plagiarism check by iThenticate or similar. All manuscript submissions must provide a similarity report (up to 15% excluding quotes, bibliography, abstract, method).


Open Access - All research articles published in PressAcademia Journals are fully open access; immediately freely available to read, download and share. Articles are published under the terms of a Creative Commons license which permits use, distribution and reproduction in any medium, provided the original work is properly cited. Open access is a property of individual works, not necessarily journals or publishers. Community standards, rather than copyright law, will continue to provide the mechanism for enforcement of proper attribution and responsible use of the published work, as they do now.