The evaluation of the effect of capital structure in financial performance measurement: An application in Borsa Istanbul

The capital structure desicions of a company are about the amounts of equity capital and foreign sources on the capital structure of the company. The desicions at issue compose of the desicions that the financial manager should take investments, finance and payment of divident. Examining the literatüre about the capital structure, it is clear that the capital structure affects the profitability of the company and market value. In addition to this, the desicions of the capital structure are the desicions which affects the financial performance of the companies. The companies obtain the facility for taking desicions correctly, planning and inspecting effectively with financial performance analysis. Performance is the facility of an object to produce results depending on a target about a topic, the priorties of which have already been determined, within a certain period. The targets in question are termed as standards and they enable one to detemine to what extent the planned targets and the achieved targets have been attained. Thus, performance in terms of companies are the integrity of the affords demonstrating whether the targets have been accomplished. The performance of a company is reflected more correctly thanks to financial performance analysis. In the study control variables such as size of the company, growth rate, tax level, none-debt tax shield, liquidty and leverage rations were selected as independent variables and their relationships with the variables of profitability which are performance determinants of the companies were examined. In this way, the effect of the desicions of the capital structure was tried to be specified in the measurement of financial performance. When the results of the study are examined, they show that only a single theory is not valid in the explanation of the companies' capital structures. Instead pecking order theory is valid for the models about return on assets and trade-off theory for the models about return on eguity. Keywords: Capital Structure, Capital Structure Theories, Financial Performance, Panel Data Analysis, Pecking Order and Trade-off Theory.