The impact of asymmetric knowledge in capital structure decisions: An application on BIST Industrial Indeks

The sum of the resources firms use to finance their assets constitutes the capital structures of firms. Along with the factors affecting the capital structure decisions of the firms included in the Istanbul Stock Exchange Industrial Index in Turkey, investigating the effect of asymmetric information on capital structure decisions is the purpose of this study. The effect of asymmetric information on capital structure decisions was tested by using dynamic panel data method with the annual data of 100 companies included in the Istanbul Stock Exchange Industrial Index for the period 2003-2017. Whilst two different model trials have been made in which one period lagged value of the capital structure was taken as an dependent variable; the unit root, correlation and cross-sectional dependence tests of the variables used in the models were performed. Theoretical expectations and literature review indicate that there is a relationship between transaction volume and company announcements as an indicator of asymmetric information. A high transaction volume variable is an indication that information is leaked from the inside. According to empirical findings, current ratio, asset structure ratio, equity profitability ratio, financing cost, non-debt tax shield, sales volume negatively and significantly affect the capital structure while effective tax rate, firm size, 5-day trading volume and 10-day trading volume variables have a positive and significant effect on the capital structure. The results obtained in the application have supported the existence of asymmetric information and are consistent with the theory literature. These results are consistent with both financial hierarchy theory and balancing theory. Keywords: Asymmetric Information, Capital Structure, Istanbul Stock Exchange, Dynamic Panel Data