The Firm-Specific Determinants of Corporate Capital Structure: Evidence from Turkish Panel Data

Abstract

The purpose of this study is to carry out an empirical testing, using dynamic panel data methodology, to analyze the impact of firm specific characteristics on the corporate capital structure decisions of Turkish firms. The sample covers 123 Turkish manufacturing firms listed on the Istanbul Stock Exchange (ISE) and the analysis is based on the year-end observations of ten consecutive years running from 1993-2002. In this study, the panel data methodology is used and six variables – size, profitability and growth opportunities in plant, property and equipment, growth opportunities in total assets, non-debt tax shields and tangibility – are analyzed as the firm specific determinants of the corporate capital structure. This work contributes to the existing body of literature in the way that all of the independent variables of the study are significant determinants for the capital structure decisions of Turkish firms. Our analysis shows that variables of size and growth opportunity in total assets reveal a positive association with the leverage ratio, however, profitability, growth opportunities in plant, property and equipment, non-debt tax shields and tangibility reveal inverse relation with debt level.

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