Factors affecting the adoption of conservative financing policy: The case of Turkish listed firms

Although it has been almost forty years since the establishment of modern stock exchange, Turkish stock market is an emerging market with a limited number of listed firms which are mostly controlled by a family or a company group where families are major shareholders. Beside this, Turkish economy has been in a continuous cycle consisting of crises and subsequent recovery periods since 1980's. The analysis on the data regarding financing preference of non-financial firms registered on Borsa Istanbul over the fifteen-year period indicates that the majority of those firms are less lenient to debt financing and many of them tend to follow a conservative financing policy. However, prior studies on Turkish firms missed this behaviour since debates revolved around the capital structure and its associated determinants. Thence, this study adds a new dimension to conventional capital structure debates in Turkey by investigates this behaviour and its determinants. On the other hand, previous researches on conservative financing policy broadly deal with the issue by investigating the behaviour of firms from developed countries, especially the UK and the US. Against this backdrop, this study provides a new perspective to the debates on conservative behaviour by representing evidences from a developing country, which experiences frequent economic crises. The findings reveal some particular outcomes, albeit they are broadly in line with the results of prior studies, especially those conducted in emerging markets.