How Does Size Affect Capital Expenditures? Evidence from Borsa Istanbul

Abstract

The aim of this study is to examine the effect of size on capital expenditures and
observe how crises affect the capital expenditures of companies of different sizes. The
panel data estimation procedure was mainly conducted to test the hypotheses. To
robust the main estimation results, the quintile estimation procedure based on the
asset size of each firm/year was employed. Additionally, we re-ran the model for the
crisis years. Size, market capitalization, and tangibility positively affect the capital
expenditure investments. Operating cash flow increases the capital expenditures with
10% significance. On the other hand, dividend payments reduce the capital
expenditures. We observed material differences depending on the size of the
companies. Also, our empirical evidence showed that crises affected the variables in
terms of significance and coefficients. This paper contributes to corporate finance by
providing an insight into the effect of size on capital expenditures from an emerging
market. This paper is the first research to investigate how different size levels and
crises affected the capital expenditures of Turkish listed companies. The results are
also supported by robustness tests

Keywords: Capital expenditures, ownership structure, listing duration

JEL Classification: G01, G30, G31