مرکز منطقه ای اطلاع رساني علوم و فناوري - Capital Structure Determinants in Financial Institutions: Turkish Banking System

Abstract :

is used to create liquidity and credit for banks. Each corporation strives for the optimal capital structure that maximizes its market value while minimizing its capital cost. Capital structure decisions are among the most critical for efficient risk management in banks. This paper aims to examine the determinants of capital structure and determine which of the capital structure theories have the power to explain the banking sector structure by focusing on the Turkish banking sector. Despite many studies on determining the capital structure of banking sector in the worldwide, these studies are limited for the sector in Turkey. Moreover, since studies in this area are usually concentrated on static models in Turkey, this paper contributes to fill the lack in the banking sectors’ capital structure literature in Turkey by using dynamic model structure in which the form of the mechanism that generated the data in previous periods are important. In this paper, the asset structure of banks, size, non-debt tax shield, profit, tax level, liquidity, and cost of borrowing is analyzed as factors that affect the capital structure. It can be concluded that theories on capital structure fail to fully explain the capital structure of the banking sector.