The effects of macro-economic factors on the capital structure of Turkish firms

Capital structure is one of the most important issues in corporate finance and a considerable number of empirical studies have been made on this topic in the developed countries. However, there has not been sufficient research in the developing countries and in Turkey. The aim of this study is to contribute to the scientific research on this topic.This study analyzes the effects of macro-economic and firm-specific factors on the capital structure of Turkish manufacturing firms traded on the Istanbul Stock Exchange. The data is obtained from the Central Bank of Turkey and ISE. The period investigated in the study runs from 1996-2004 and the analysis is applied to 136 firms.The results show that profitability, tangibility and market capitalization to GNP ratio have negative relationship with total and short-term leverage ratios. In contrast to this, tangibility and market capitalization to GNP ratio revealed a positive relationship with long-term debt ratio. Size, money supply to GNP ratio and interest rate are found to be positively related to leverage ratios