Determinants of Banks Capital Structure: Empirical Evidence on Listed Commercial Banks in Turkey

Existing literature provides sufficient evidences consistent or/and contradict of the available theories of capital structure. On the other hand, the choice of capital structure for the non-financial firms substantially varies from financial institution especially banks. This motivates enough for further studies in particular in a fast growing country such as Turkey. The present thesis empirically examines the choice of leverage of 9 listed commercial banks as the function of 4 bank characteristics namely profitability, tax shield, collateral and dividend. The present thesis uses panel OLS regression considering the robustness and diagnostic tests of the model. The findings suggest a very small but negative impact of the profitability on the capital structure of the sample banks implying a consistency with the pecking order theory. Tax shields effects were found to be insignificant. Surprisingly, the impact of collateral found to be negative and statistically significant. Finally, we report a positive but very weak association between the dividend and the choice of capital structure of the sample banks.