The effect of capital structure decisions on the firm financial performance: An example from borsa İstanbul

Capital structure decisions are one of the most important decisions that affect the financial performance, financial sustainability, financial risk and financial value of the companies. The purpose of this research is to empirically examine the impact of capital structure on company financial performance. For this purpose, the financial data of the 120 companies in the manufacturing sector traded in Borsa Istanbul for the period of 2011-2017 were analyzed by the panel data analysis method. Return on asset (ROA), Return on equity (ROE), net profit margin (NKM) and Tobin's Q dependent variables were used as indicators of financial performance. Short-term debt ratio, long-term debt ratio, total debt to total equity ratio, non-debt tax shield, company size, and company growth rates were identified as the independent variables. The Prais-Winsten estimator was used because of the correlation between the units and the heteroskedacity problems resulting from the horizontal cross-sectional data. As a result of the research, it was determined that there is a negative relationship between capital structure and financial performance. Keywords: Capital Structure, Financial Performance, Borsa İstanbul, Panel Data Analysis, Prais-Winsten Estimator.