The effect of macroeconomic indicators on the capital structure: A sectoral investigation

Capital structure is an important concept in financial literatüre, as it affects the cost of capital, budgeting and the market value of firms. For this reoason, the owner or owners of a firm want to determine the optimal capital structure that will maximize their wealth. Firm and country level factors affect the capital structure decisions of firms. Variables that firms obtain as a result of their activities and that can be controlled by the firm can be expressed as firm-level factors. Macroeconomic factors such as inflation, exchange rate, interest rate, gross domestic product (GDP) growth rate, which are determined according to the current economic situation that cannot be controlled by the firm are the factors at the country-level that affect the capital structure. Since in this study, the effects of the basic macroeconomic indicators on the capital structure wanted to be investigated, simple linear regression analysis was made by using inflation, interest, GDP growth rate and exchange rate and financial leverage ratio of the sectors for 2011-2020. The dependent variable used in the analysis is the financial leverage (debt/asset) ratio. The independent variables are inflation, interest, GDP growth rate and exchange rate. As a result of the regression analysis; it was concluded that the GDP growth rate and the exchange rate had a statistically significant relationship on the capital structure of sectors in general. It was observed that interest and rate and inflation rate had a significant positive effect on certain sectors. The results found show parallel with the trade-off theory. Keywords Capital Structure, Leverage Ratio, Macroeconomic Indicators.