This paper investigates how institutional investors affect capital structures of Borsa Istanbul (BIST) firms. Data is gathered for the period between 2005 and 2013 for 150 firms. Prior years are not taken into consideration in order not to distort the data since inflationary accounting practices were applied in the market before 2005. Data is obtained from Bloomberg database and Central Registry Agency. Sample consists of 150 non-financial firms which have full data set for the research period. Panel data analysis is used to analyze 1,350 firm-year observations. Data is investigated for the relation between institutional ownership and financial leverage. The model has been designed such that financial leverage is dependent variable, and institutional ownership is explanatory variable. Control variables such as tangibility, size, tax, profit, liquidity and market value / book value have also been employed in the model. The result of the model shows that there is a significantly negative relationship between institutional ownership and financial leverage. Keywords