Capital Structure Decisions of Turkish Firms

Abstract

This paper analyses the financing decisions of publicly traded companies in Turkey by estimating a dynamic capital structure model and using a panel of 227 industrial firms during the period 1990 to 2002. The approach adopted in this study allows for unobserved time-invariant firm heterogeneity and the endogeneity of regressors. We observe that growth opportunities, size, profitability and asset structure of firms exert an impact on financial decisions of firms. However, the results reported in this paper are not in line with the traditional view that there should be a positive relationship between leverage and firm size. Furthermore, the findings suggest that the dynamic nature of the capital structure decisions of firms should not be neglected.

Keywords: Turkey, size, growth opportunities, panel data, GMM

JEL Classification: G3, G32