Financial Policies of Turkish Industrial Companies during the Global Crisis

Latest global financial crisis that shrank the credit market affected the companies’ financial policies since the credit contraction led the firms to rely more on their own resources rather than external financing. The expectation during such crises is more equity issues along with less borrowing. In economic literature there are some evidence supporting this fact for developed countries. As an emerging country Turkey’s case is different than that of advanced countries. The era commenced with Lehman turmoil by passed Turkish economy in the first years due to the solid, strong and healthy banking sector due to the measurements taken after 2001 banking crisis of Turkey. Therefore, international lenders did not hesitate directing their funds to Turkish banks. As a result, Turkish companies did not suffer in financing their investments through bank loans. Moreover, the growth policy of Turkey based on current account deficit supported Turkish economy and in turn the firms due to the abundance of liquidity after the peak of the crisis. In this work we examined 164 industrial firms that are traded on Borsa Istanbul to see if there happened to be a shift in their financing preferences during the recent global crisis. We found that the importance of borrowing had not decreased and that contradicts the expectations. As of equity issues, before and after 2009 no radical change has been observed. In 2009 where the crisis hit worst Turkish economy leading a 4.7% GDP decrease, the equity issues were doubled.