Determinants of Capital Structure: A Study of the ISE Firms Operating in Cement, Automotive and Information Technology Industries

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The main purpose of this study is to determine the factors affecting the capital structures of cement, automotive and information technology firms traded in Istanbul Stock Exchange and to expose the industrial differences in the capital structures of the firms for the period 2007-2011. The financial ratios calculated from the financial tables of the firms are used in the panel data analysis of this study. In the research models, the dependent variables are the leverage ratios of the selected firms. Profitability and liquidity ratios and firm size, asset tangibility, growth rate and non-debt tax shield are assigned as independent variables. According to the empirical findings, there is no significant relation between long-term debt ratios and any independent variables in the cement and automotive industries. However, firm size and asset tangibility are found to be significant in explaining the long-term debt structure of information technology firms. Debt ratio is positively related to firm size both in the cement and information technology industries, which gives support to trade-off theory. Besides, debt ratio is positively related to growth rate both in the information technology and automotive industry in accordance with the capital structure theory. Consequently, the results show that the debt ratio sensitivities of the Turkish firms to the explanatory variables differ significantly between the three industries studied.

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Capital structure , trade , off theory , ISE , cement , automotive , information technology.

Ege Academic Review (EAR)

496

Ege Academic Review (EAR)