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The Determinants of Capital Structure: Evidence from the Turkish Manufacturing Sector

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  • Songul KAKILLI ACARAVCI

    (Faculty of Economics and Administrative Sciences, Department of Finance, Mustafa Kemal University, Antakya-Hatay, Turkey.)

Abstract

This study investigates the determinants of capital structure in Turkey by using panel data methods. The sample period spans from 1993 to 2010 for 79 firms in the manufacturing sector traded on the Istanbul Stock Exchange. The base model was expanded with firm size and sectorspecific effects. This study compares also effects on capital structure according to sectors and firm size of variables used in models. Growth opportunities, size, profitability, tangibility and non-debt tax shields are used as the firm-specific variables that affect a firm's capital structure decision. Empirical results present that there are significant relationships between growth opportunities, size, profitability, tangibility and leverage variables. But non-debt tax shields explanatory variable has insignificant effect on leverage 1 (book value of total debt / total assets) variable. Growth opportunity has effect on capital structure that this result supports the trade-off theory. Size, profitability and tangibility have effects and support the pecking order theory. On the other hand, profitability and growth opportunity variables have more significant effects than other variables on Leverage 1 and Leverage 2 (book value of total debt / book value of equity) for all sectors. Furthermore, in two leverage models, profitability variable of small and large firm groups has effect on capital structure and there is no a significant difference between two groups.

Suggested Citation

  • Songul KAKILLI ACARAVCI, 2015. "The Determinants of Capital Structure: Evidence from the Turkish Manufacturing Sector," International Journal of Economics and Financial Issues, Econjournals, vol. 5(1), pages 158-171.
    • Handle: RePEc:eco:journ1:2015-01-13
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    More about this item

    Keywords

    Capital structure; leverage; financing choice; the determinants of capital structure; panel data analysis.;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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