Adjustment to Target Capital Structure and Global Financial Crisis: Evidence from Turkey

Research output: Contribution to journalArticle

Abstract

The aim of this study is to investigate the adjustment speed towards target capital structures of the publicly-traded firms in Turkey for the period 2003-2016. To observe the impact of the 2007-2009 global financial crisis on the adjustment speed, additional estimations for the sub-periods are also employed. Consistent with the dynamic trade-off theory, Turkish firms adjust their capital structures to reach the target
but the adjustment speed is relatively slow. The findings reveal that firms tend to close the gap between their current and target level of leverage by approximately 12% - 14%, each year. However, the adjustment speed is significantly lower for the post-crisis period (9% - 10%) than the crisis and pre-crisis periods (14%-16%). Additional findings also show that over-levered firms tend to adjust their capital structures more quickly than the under-levered firms. The findings are robust to different methods of estimations and also different considerations of the time periods.
LanguageEnglish
Pages543-557
Number of pages15
JournalBusiness and Economic Research Journal
Volume9
Issue number3
DOIs
Publication statusPublished - 1 Jul 2018
Externally publishedYes

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Turkey
Global financial crisis
Capital structure
Adjustment speed
Trade-off theory
Leverage

Cite this

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title = "Adjustment to Target Capital Structure and Global Financial Crisis: Evidence from Turkey",
abstract = "The aim of this study is to investigate the adjustment speed towards target capital structures of the publicly-traded firms in Turkey for the period 2003-2016. To observe the impact of the 2007-2009 global financial crisis on the adjustment speed, additional estimations for the sub-periods are also employed. Consistent with the dynamic trade-off theory, Turkish firms adjust their capital structures to reach the targetbut the adjustment speed is relatively slow. The findings reveal that firms tend to close the gap between their current and target level of leverage by approximately 12{\%} - 14{\%}, each year. However, the adjustment speed is significantly lower for the post-crisis period (9{\%} - 10{\%}) than the crisis and pre-crisis periods (14{\%}-16{\%}). Additional findings also show that over-levered firms tend to adjust their capital structures more quickly than the under-levered firms. The findings are robust to different methods of estimations and also different considerations of the time periods.",
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Adjustment to Target Capital Structure and Global Financial Crisis : Evidence from Turkey. / Yildiz, Yilmaz.

In: Business and Economic Research Journal, Vol. 9, No. 3, 01.07.2018, p. 543-557.

Research output: Contribution to journalArticle

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