The capital structure of private health institution: Capital structure and financial performance relationship between private health sector

Today's increasingly competitive environment conditions, force the companies to use their resources in an optimal way. To achieve this, periodically the company managers need measurements and evaluations in order to determine deviations from the plans and to see the market position against the competitors. Capital structure represents assets and cash flows of the companies? rights and allows the determination of the company?s structure. In broad sense the capital structure itself is an effective factor of the whole capital cost of the company and represents long-term investor debts and capital stocks? expected income rates. The aim of the financial manager is to maximize the value of the firm for the partners by forming the capital structure that will best respond the firm necessities, in other words to reach the optimum capital structure. To reach the optimal composition of the capital, the managements form capital combinations by making various analyses. The capital structure decisions are vital in our country and all over the world. Issues connected with the capital structure decisions are related with the kind of financial resources of the firms, the change in rates and values by the time. The compositions of the optimal capital formed by the management will achieve increase in the firm income, resistance against competitive situations and increase in management performance and profit. Thus, the analysis of the capital structure of the management is essential for the financial success. The goal of this study is to determine the capital structure and financial index of the private hospitals, drug and medical firms showing activities in private health care sector of Turkey. Between the years 2002-2011, all the private hospitals, medical and drug firms that had data in Turkish Central Bank form the environment of this study. In this study, all the data available for analysis was used without sampling. To determine the capital structure of the private medical companies rate analysis, chi-square test to establish the relation between the capital structure and financial performance and finally for the profiling of the companies according to their capital structure, one of the data mining method that CHAID Decision Tree Method were used. According to the findings, 297 of 526 firms related in the study (56.4%) the capital structures have no risk but 229 of them (43.6%) have risky capital structures. Also, 140 of the 526 firms (26.6%) have negative (bad) financial performance whereas 386 of them (73.4%) have positive(good) financial performance. When the firms are analyzed individually, this relation is valid for the private hospitals and medical firms. In addition, the financial profiles of the firms in the private health sector is evaluated by CHAID Decision Three Method and shown in 10 different profiles according to the capital structure risky and not risky. In this study the profiles of the firms with risky and not risky capital structures were determined. The capital structure is determined by risk, profitability and cost of capital relationship and each firm must take three main points in consideration during the construction of the capital structure. According to the results of the study, if the risky firms decide to decrease their risk levels we advise them to perform benchmarking by studying the profiles and financial indices of the firms without risk.