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The determinants of capital structure of real estate companies: Evidence from China

Yao, Li (2015) The determinants of capital structure of real estate companies: Evidence from China. Masters thesis, Universiti Utara Malaysia.

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Ultimately global property markets continue to receive an increasing degree of
interest from institutions, fund managers, and private investors. With real estate
having formally been acknowledged as an asset class, it is receiving a strong
reputation as a relative source of more stable returns, higher yields and steady cash
flows. Research has proved that capital structure selections differs significantly
across industries. Property industry is exclusive in diverse industries in terms of
capital structure selection. This as a result of property firms have more security (real
estate assets) to deal with larger amounts of debt, and usually have higher leverage
ratios. Therefore, this study is important as it develops the understanding of capital
structure determinants in Chinese real estate companies (REC). This study examines
capital structure determinants of real estate companies in China, listed on the
Shanghai Stock Exchange and Shenzhen Stock Exchange from the year 2005 until
2012. The final sample consists of 70 with a total of 561 observations.
The findings clearly confirm for what has been found in other studies but in different
scope. The result shows that the most powerful factor in affecting LEVERAGE
decisions in the model is non-debt tax shields, profitability, tangibility and size of the
companies. The result shows that non-debt tax shields is positively related to total
debt for Chinese REC. Profitability is negatively significant to leverage in both
models and in line with the pecking order theory. The positive relationship between
tangibility and leverage gives support to the trade-off theory which postulates that
tangible assets act as collateral and provide security to lenders in the event of
financial distress. The size of REC companies is positively and significantly control
for leverage, bigger firms can borrow at more favourable rates because they are
perceived as less risky.

Item Type: Thesis (Masters)
Supervisor : Zainuddin, Zaemah
Item ID: 5565
Uncontrolled Keywords: Capital structure, leverage, RECs, China
Subjects: H Social Sciences > HG Finance
Divisions: School of Economics, Finance & Banking
Date Deposited: 10 Apr 2016 02:34
Last Modified: 29 Mar 2021 09:24
Department: Othman Yeop Abdullah Graduate School of Business
Name: Zainuddin, Zaemah
URI: https://etd.uum.edu.my/id/eprint/5565

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