Capital structure adjustment speed : evidence from Borsa Istanbul sub-sectors

In this chapter, we have scrutinized the adjustment speed of Borsa Istanbul index sub-sectors during the pre-crisis, crisis, and post-crisis periods. The classical dynamic partial adjustment model developed by Flannery and Rangan (Journal of Financial Economics 79:469-506, 2006), which is frequently used in the literature, is used to estimate the target debt level. The adjustment speed could be determined except in one of the six sectors in the BIST100 index. For all periods, the adjustment speed of the sub-sectors is below 50%. Empirical evidence on the existence of the target debt level of these five sectors supported the trade-off theory. Another striking finding is the significant decrease in the adjustment speed of the BİST 100 index sub-sectors during the crisis period.