Determinants of Capital Structure: Evidence from a Major Emerging Market Economy

Bülent Köksal, Cuneyt Orman () and Arif Oduncu

MPRA Paper from University Library of Munich, Germany

Abstract: This paper uses a new and comprehensive dataset to investigate the capital structure of non-financial firms in a major emerging market economy, Turkey. We study both statistical and economic significance of four types of leverage factors: Firm-specific, tax-related, industry-specific, and macroeconomic. Results suggest that tax-related factors and asset tangibility are the most economically significant factors for short-term and long-term debt ratios, respectively. Results also suggest that inflation is an important determinant of leverage and the most economically significant macroeconomic factor. Moreover, we provide evidence that firms adjust their leverage towards the industry median, that firms match the maturity of their assets and liabilities, and that inflows of foreign capital have a marked influence on firms’ capital structures, particularly on large and mature non-manufacturing firms. We also conduct a systematic analysis of capital structure differences between manufacturing and non-manufacturing, small and large, and young and mature firms. Overall, the trade-off theory appears to be more successful than the pecking order theory in accounting for the capital structure of Turkish non-financial firms.

Keywords: Capital structure; non-financial firms; pecking order theory; trade-off theory; Turkey (search for similar items in EconPapers)
JEL-codes: G30 G32 (search for similar items in EconPapers)
Date: 2013-07-17
New Economics Papers: this item is included in nep-ara and nep-cwa
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Determinants of Capital Structure: Evidence from a Major Developing Economy (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:48415

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