Capital Structure in an Emerging Stock Market: The Case of Turkey*

Capital structure is an important factor in planning and realising operations of a company.
Operations and decisions of a company shape the capital structure. The aim of this paper is to
investigate the firm-specific determinants of capital structure under changing economic conditions
in Turkey. The paper applies panel data analysis for manufacturing firms listed on the Borsa
Istanbul (BIST) over the period of 2003-2011. Results show that, established theories such as
trade-off, pecking order, and market timing fail to explain the observed leverages adequately,
largely made up of short time debts. This outcome is not surprising as most of the assumptions of
these theories are effective for the developed markets, which are not in force in the developing
countries