Testing Capital Structure Theories with CBRT Sectoral Balance Sheets: A Panel Data Analysis on Manufacturing Industry Sector (2001-2015)

Nowadays however various theories for optimum capital structure that can minimize cost of capital and maximize value of firm are discussed, there is no universal capital structure theory agreed upon. Testing main capital structure theories in manufacturing industry sector which is the main source of exporting and one of the most strategic sectors of economy in our country may give opinion about debt dynamics of the sector. In this article, in the context of Trade-off and Pecking Order Theories, main determinants at firm level of capital structure have been studied with the Central Bank of the Republic of Turkey (CBRT) sectoral balance sheets which is the largest real sector data set in our country by using two-way panel data analysis in the period 2001-2015. Econometric analysis results show that in Turkish manufacturing industry sector leverage ratio is negatively affected by return on assets, current ratio, tangible assets to total assets ratio and assets growth rate and positively affected by real volume of net sales. According to the results of study debt behaviours in Turkish manufacturing industry sector are mostly explained by Pecking Order Theory and partly explained by Trade-off Theory.