Investigation of leverage procyclical in Borsa Istanbul companies

General market conditions are an important factor affecting the capital structures of companies. Companies obtain more foreign resources if the general economic situation is expanding. Thus, leverage ratios also increase. On the other hand, it becomes difficult to find foreign resources when market conditions is contracting. Companies obtain more limited foreign resources and tend to use more equity. Leverage ratio decreases with the increase of equity capital within the capital structure. Therefore, it can be said that the leverage ratio and the market are procyclical. The aim of the research is to analyze whether procyclical the leverage structures of companies whose are traded in Borsa Istanbul between 2006-2020. The reason for the determination of the years covering the research is change in accounting standards, based on paragraph (b) of the 9th article of the Regulation on the Procedures and Principles Regarding the Operations of the Turkish Accounting Standards Board on 31.12.2005. In the research, the total assets and financial leverage ratios of banks and non-bank companies were calculated and their effects on capital structure decisions were examined.159 companies whose are traded in Borsa Istanbul between 2006-2020 and whose data could be accessed completely were included in the research. These companies, 8 are banks and 151 are non-bank companies. According to the result of the research, the procyclical of the leverage ratios of banks has been determined. However, procyclical could not be determined in non-bank companies. Accordingly, there was no change in the leverage of non-bank companies during the increase or decrease in total asset.