CAPITAL STRUCTURE OF FIRMS: PECKING ORDER AND TRADE-OFF THEORIES, EVIDENCE FROM TURKISH STOCK EXCHANGE
Published: 28 Aug 2016
Abstract: This study aims to identify the factors that are influential on capital structure decisions of firms on the Borsa Istanbul BIST 50 Index and test which of the theories -pecking order or trade-off- is used to account for the firms’ borrowing behaviors. The firms which are on the BIST 50 Index and which operate in the finance sector were removed from the sample due to the difference of their structures. Leverage ratio was used as the dependent variable while return on assets (ROA), size of firms and growth rate were treated as independent variables. The post-financial crisis period 2009-2015 was examined with panel data regression analysis. It was found that the capital structures of 36 companies on the BIST 50 Index were in conformity with the pecking order theory.
Keywords: pecking order theory, trade-off theory, capital structure, agency theory, asymmetric information
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