Determinants of Capital Expenditures: Evidence from Borsa Istanbul

Abstract

Purpose
The aim of this study is to examine the determinants of capital expenditures in terms of ownership structure of firms (Foreign ownership and institutional ownership) and some-firm specific characteristics using Turkish listed companies and is to provide insightful evidence to the corporate governance literature about an emerging market.

Design/Methodology/Approach
Panel data estimation procedure was mainly conducted to test the hypotheses. To robust the main estimation results, quantile estimation procedure based on the asset size of each firm/year was employed. Besides, we tested the changing point for listing duration and size by using the squares of the related variables and re-run the model for the crisis years.

Findings
The findings revealed that institutional and foreign ownership do not affect the companies’ capital expenditure behavior in terms of net capital expenditures. Besides, the outcomes showed that companies’ size, cash flows from operating and tobin’s q (i.e. firm value) positively affects the capital expenditure behaviors, however net margin and listing duration decrease the net capital expenditures. On the other hand, when we divided our sample quintiles based on the asset size of each firm, the results show that the companies’ behavioral difference depend on the companies’ size. The results also indicated that the financial crisis affected the capital expenditure behavior of the companies traded in Borsa İstanbul.

Originality/Value
This paper makes a contribution to the corporate finance by providing an insight on determinants of capital expenditure from an emerging market. This paper is first research to investigate the determinants of capital expenditures of the Turkish listed companies.

This paper provides a perspective on the institutional ownership’s impact on the companies’ capital expenditures. The results are also supported by the robustness tests.

Keywords: Capital expenditures, ownership structure, listing duration

JEL Classification: G01, G30, G31