Capital structure and financial performance relationship by Turkish and german markets: evidence from a nonparametric approach

Abstract

This study aims is to examine the relationship between the capital structure of manufacturing firms traded in different markets and their financial performance. For this purpose, annual data for the period 2011-2020 of Borsa Istanbul and Frankfurt Stock Exchange are analyzed. While the fast-calibrated aggregate quantile regression method which is a machine learning algorithm is preferred as the basis of the analysis, the panel data analysis is used to compare the findings. According to the findings of nonparametric approach, it is determined that there is a non-linear relationship between capital structure elements and debt ratios. Also, they vary depending on the quantiles. Non-linear and nonparametric relationships between variables support modern capital structure theories. Although the results of panel data analysis also support same theories, nonparametric findings provide more detailed outputs. The findings of the study contribute to the literature and to the real and financial authorities in terms of both comparing two developed and developing countries and investigating capital structure theories using two different methods.