Factors affecting leverage during a financial crisis: Evidence from Turkey

The purpose of this study is to investigate the determinants of capital structure over time and the level of leverage before, during and after a financial crisis. Using a sample of publicly traded Turkish firms for the period of 1989–2012, we hypothesize and find that firm size and industry median leverage are positively and significantly associated with leverage while profitability and growth opportunities are negatively and significantly associated with leverage. Furthermore, we hypothesize and find that leverage levels are different before, during and after a financial crisis. The results are consistent using both static and dynamic models of leverage. The results suggest that managers need to adjust their leverage during and after a financial crisis to meet their need for debt and equity financing.