Minsky Financial Instability hypothesis : an application on Borsa İstanbul (BİST) 100

Minsky Financial Instability Hypothesis (FIH), which is one of the theories that aims to explain financial instabilities, investigates the effect of the structure of the debts structure on financial stability in a capitalist system. Minsky argues that investors go into debts in an excessive amount with the anxiety of gaining great profits; then, these debts lead to payment problems, and eventually, these problems lead to financial instability. He also states that financial market instability lead to economic insatiability after it is spread to the general economy in the country. Owing to this cycle, Minsky claims that the capitalist system, in its true nature, is instable. According to Minsky, the main reason of the instable structure is the companies 'borrowing tendencies and he argues that the financial structures of the companies is determinats of the economy. The aim of the study is to determine the basic elements of the instable structure mentioned above. In this context, the study has been based on the company data of the years 1994-2014 given in BIST100 Index as the exemplification of Turkey. Different from the previous studies in the literature, the financial instability hypothesis has been handled in the micro scale. In this context, the aim in the study is to determine the factors that affect economic and financial instability based on the financial structures and profitability ratios of the companies. The purpose of this study is also to investigate whether there is a causal connection between economic and financial instability. The variables used in the study are the profitability and debts of the companies, accounts receivable turnover rates, average collection period of the receivables, current ratio, economic instability, financial instability, interest coverage ratio, financing rate, the ratio of earnings before interest and tax to total assets, leverage ratio, liquidity ratio, cash ratio, growth of the net sales, stock turnover rate and the cost of the sales. The Holtz-Eakin Panel Causation and Panel SUR equations have been made use of in the study. Key Words: Financial Instability Hypothesis, Financial Instability, EconomicInstability, Panel SUR, Holtz-Eakin Causation Analysis