Macroeconomic and Institutional Determinants of Financialisation of Non-Financial Firms: Case Study of Turkey

Abstract

We observe that industrial firms in Turkey have shifted substantial amounts of working capital from production activities to the purchase of high-yield interest-bearing assets most notably public bonds to ensure immediate short-term interest revenues. Introducing the new and historical institutional literatures to the financialisation research this article empirically examines the influences of macroeconomic and institutional factors on non-financial firms' financialisation behaviour for the period 1990-2002. The findings from panel regression analyses using data from 41 firms listed on the Istanbul Stock Exchange indicate that both macroeconomic and institutional factors influence financialisation behaviour to different degrees. Turkish non-financial firms particularly engage in financialisation as a response to highly uncertain macroeconomic conditions. The findings indicate that the key characteristics of state-organised business system in Turkey such as firms' ties with the government and family ownership are not conducive to financialisation behaviour.