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

Özet

The aim of this study is to investigate the adjustment speed towards targetcapital structures of the publicly-traded firms in Turkey for the period 2003-2016. Toobserve the impact of the 2007-2009 global financial crisis on the adjustment speed,additional estimations for the sub-periods are also employed. Consistent with thedynamic trade-off theory, Turkish firms adjust their capital structures to reach the targetbut the adjustment speed is relatively slow. The findings reveal that firms tend to closethe 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 alsoshow that over-levered firms tend to adjust their capital structures more quickly thanthe under-levered firms. The findings are robust to different methods of estimations andalso different considerations of the time periods.