مرکز منطقه ای اطلاع رساني علوم و فناوري - Effect on Profitability Of Capital Structure: Panel Data Analysis on BIST 100

Abstract :

The relationship between capital structure and profitability is one of the subjects that is being debated in the literature since almost half a century. Modigliani – Miller (1958) argued that the capital structure of an organization has no effect on its value. According to this theory, called the irrelevancy of capital, there is no difference in terms of organization value between the use of equity and the use of loans. On the other hand, Myer (1984) argued that factors such as the tax shield of a loan and non-loan tax shields may affect the capital structure of an organization. This study examines the balance data for 100 organizations that are active in Istanbul Stock Exchange for the period between 2006 and 2015. The study investigates the relationship between the changes in capital structure and the organization’s profitability along the years The components of capital structure consist of equity, shortand long-term loans, auto financing resources and stocks. The results of panel regression analysis indicate that there is a significant positive relationship between choosing more equity and profitability. The study determined that there is no significant relationship between choosing long-term foreign capital and profitability. On the other hand, a positive significant relationship was discovered between choosing legal reserve as auto financing resource and profitability .