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Abstract enCapital structure and its possible effects on the firms’ financial and real decisions have been one of the most debated concepts in finance literature. This paper investigates the relation between firms’ financial and real decisions, in terms of capital structure and firm performance. Such possible relation is analyzed for the manufacturing firms, which are traded in Borsa Istanbul during the period of 2003- 2015. Return on equity and return on assets are used as measures of firm performance; and short-term debt to total assets, long-term debt to total assets and debt to equity is used as explanatory variables; the total assets are control variables.The findings of the study presented that for both short-term debt and long-term debt have a negative and statistically significant effect on both return

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