Corporate Leverage Dynamics Under an Unorthodox Monetary Policy Regime : Evidence from Industrial Firms Listed On Borsa Istanbul (2016-2023).

Abstract

Abstract :

This present paper aims to examine whether firms' pre-existing exposure to short-term liabilities was linked with differential corporate leverage adjustment during Turkiye's 2021-2023 macro-financial regime. This paper uses a balanced panel of 36 non-financial industrial firms listed on Borsa Istanbul,yielding 288 firm-year observations during the period of 2016-2023. Firm level exposure is measured as each firm's average current-liabilities-to-total-assets ratio during the 2016-2020 baseline period.The empirical analysis relies on Two-way fixed-effects models specifications that include firm and year effects and control for size,profitability,tangibility,liquidity,and operating cash flow.Inference is conducted using standard errors clustered with a finite-cluster degrees-of -freedom correction.The interaction between the regime indicator and firm's pre-existing short-term liability exposure is negative and the statistically significant in liability-based leverage model. The estimated coefficient for short-term liabilities and long-term liabilities are likewise negative ,however they are only weakly significant,while the coefficient for liability-maturity remains statistically not significant under the more conservative small-cluster inference.The principal leverage result is robust when sales growth is added,when 2023 is excluded , which limits the regime period to 2021-2022.Overall ,the findings provide robust evidence of a differential association between firms ' pre-existing liability exposure and total leverage adjustment.However,the empirical design does not permit a causal interpretation of the effect of policy-rate reductions or identify a single transmission mechanism operating through debt maturity. The present study contributes to the literature on firm heterogeneity by demonstrating that firms’ pre-existing liability structures play a major role in shaping balance-sheet responses in a volatile emerging-market context.

Key words :Unorthodox monetary policy, corporate leverage , firm heterogeneity,short-term liability exposure,monetary-policy transmission ,Borsa Istanbul , Turkey.