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BUSINESS AND ECONOMICS RESEARCH JOURNAL

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Article Information
Journal: Business and Economics Research Journal
Title of Article: Adjustment to Target Capital Structure and Global Financial Crisis: Evidence from Turkey
Author(s): Yilmaz Yildiz
Volume: 9
Number: 3
Year: 2018
Page: 543-557
ISSN: 2619-9491
DOI Number: 10.20409/berj.2018.122
Abstract
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 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.

Keywords: Speed of Adjustment; Dynamic Capital Structure; Trade-off Theory; Financial Crisis; Turkey

JEL Classification: C23, G3, G32

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