Testing the validity of modern capital structure theories: A research on BIST 30 index firms

Factors affecting the capital structure of companies and the degree of their influence differ from country to country, from sector to other sector and even among businesses in the same sector. In order to create the most suitable capital structure, financial managers should evaluate their decisions based on these various factors and their effects. Therefore, whether the capital structure and factors affecting the capital structure are compatible with the theories of capital structure is one of the issues that should be analyzed. In this study, the validity of capital structures of 15 firms that are continuously traded in BIST 30 Index in the period 2009:6-2019:6 is tried to be tested with the modern capital structure theories. While the capital structure is represented by financial leverage ratios, firm-specific factors are represented by non-debt tax shield, growth rate, firm size, firm risk, profitability, liquidity, and fixed assets. By using panel data analysis, six econometric models were created to test the validity of modern capital structure theories, and each model is tested by turn. The findings of the analysis have been associated with modern capital structure theories. As a result of the study, it has been determined that the capital structure behaviors of the companies which are within the scope of the sampling are more in line with the theory of financial hierarchy.