An investigation of the relations between ownership structure, capital structure and financial performance: A research in Borsa Istanbul

This thesis is a research that provides empirical evidence about the interaction of ownership structure, capital structure and financial performance. The aim of the study is to provide useful information to stakeholders about the relationships between these elements. In line with this purpose, the effects of ownership structure on financial performance, capital structure on financial performance and ownership structure on capital structure were investigated. This research covers the period 2012-2017 (6 years) of 20 companies selected among each of the 3 sub-sectors (60 firms in total) in Borsa İstanbul manufacturing industry sector. The 3 sub-sectors included in the sample are: (1) Chemical, petroleum rubber and plastic products; (2) Metal products, machinery and equipment; (3) Non-metallic mineral products. The findings obtained as a result of panel data analysis are as follows: The shares owned by largest shareholder negatively affect the net profit margin and market performance. If foreign ownership increases, financial leverage decreases but profitability increases. An increase in the shares of institutional shareholders, and an increase in the shares of the second and third largest shareholder compared to the shares of the largest shareholder, increase financial leverage and firm performance. As free-float shares increase, financial leverage increases but financial performance decreases. On the other hand, financial performance is negatively influenced by financial leverage and financial leverage is negatively influenced by return on assets. These results are not consistent with the agency and signal theories in terms of the negative impact of debt on financial performance. But the results support the pecking order theory in terms of firstly internal financing and then external financing preference; the active monitoring hypothesis in terms of the positive contributions of non-controlling big shareholders to the firm performance and the hypothesis of entrenchment of the controlling shareholders who are generally managers in terms of the expropriation from minority shareholders.