Ownership, efficiency, and indebtedness: a comparison of private and public firms in Turkey

The public sector in Turkey which was founded in the early 1930’s for the production of basic consumer goods has been accused of being a drain on public resources and of accounting for the bulk of the public deficits since the early 1980’s. This thesis investigates if the effect of efficiency on the distribution of bank credit is different for public and private firms. Firm level efficiencies are estimated from production function and these estimated efficiencies are used to estimate the capital structure equation. The results show that the efficiency of a firm affects its access to bank credit negatively for public sector and positively for private sector.