Determinants of Capital Structure in Turkey and USA

ABSTRACT: This thesis focused on effects of global financial recession on the capital structure of firms in two different countries. Variables chosen for the study are according to Sheikh & Wang (2011) which are tangibility, size, profitability, non-debt tax shield, growth and liquidity. Furthermore, the study three different ratios as total debt ratio, total long term ratio and short term debt ratio. The period chosen for the study includes the years from 2000 to 2012 which includes the global financial crisis. All the variables are taken in to a panel structure to see whether they could determine the changes in the dependent variables. In addition, correlation analysis is implemented in Eviews to test the Multicollinearity. Heteroskedasticity and autocorrelation are tested for regression. Regression results are divided according to the sub periods of 2000 to 2007 and 2008 to 2012. Result show that determinates of capital structure differ from Turkey to USA. Furthermore, the results also change based on the periods. For the whole period, tangibility and profitability are calculated to cause changes in total debt for the case of Turkey. On the other hand, Profitability, liquidity and size are reported to cause changes in total debt in USA. Especially, liquidity is found to be very significant for short term debt during and after the crisis for both economies. Keywords: Capital Structure, Financial Crisis, Developed Markets, Emerging Markets. …………………………………………………………………………………………………………………………