The Determinants of Corporate Debt Ratio : An Empirical Analysis on Turkish Corporations

The purpose of this study is to analyze the determinants of leverage in Turkish corporations. Using data on 48 non-financial ISE (Istanbul Stock Exchange) listed companies for the period 1998-2007, the relationships of leverage with a set of explanatory variables are investigated. In addition to using the ratio of long-term debt to long-term debt plus market value of common stocks as the general leverage measure, we use the ratio of short term-debt to total assets. To investigate the relationships, two panel data equations are formed for each leverage measure. The findings indicate that firm size and collateral value of assets are positively related to leverage, while dividend payout ratio, profitability and CEO duality are negatively related to leverage. On the other hand, firm size and profitability are negatively related to the level of short term-debt, whereas it has positive relations with dividend pay-out ratio and ownership concentration. Collateral value of assets does not seem to be related to the level of short-term debt. 2001 crisis in Turkey seems to have increased short-term financing that year