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

Yilmaz Yildiz
2018 Business and Economics Research Journal  
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
more » ... 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.
doi:10.20409/berj.2018.122 fatcat:b2rxu77gmbbuhiracr4gumrfsi