Does the Capital Structure Influence the Firm Performance of Real Estate Listed Companies Positively Between 2010 to 2020 in China

Research Article
Open access

Does the Capital Structure Influence the Firm Performance of Real Estate Listed Companies Positively Between 2010 to 2020 in China

Qi Shi 1*
  • 1 Durham University    
  • *corresponding author lncs@springer.com
Published on 13 September 2023 | https://doi.org/10.54254/2754-1169/7/20230214
AEMPS Vol.7
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-41-6
ISBN (Online): 978-1-915371-42-3

Abstract

The financial structure of a firm is often regarded as the most essential factor influencing its operating performance. The real estate industry, as an important part of China's current national economy, is a typical capital-intensive industry with a large demand for capital. However, the industry's characteristics lead to a relatively slow return of capital in the real estate industry, putting pressure on the industry's financing capacity and capital structure. This paper divides the capital structure into two components: gearing ratio and debt structure, and takes China's real estate listed companies from 2010 to 2020 as a sample. The influence of capital structure on the performance of listed companies is examined empirically. It is found that there is a non-linear relationship between gearing and firm performance, i.e. an inverted U-shaped relationship. This paper still holds after robustness tests such as variable substitution, which are hoped to be useful for business performance, future government regulation and policy implementation.

Keywords:

capital structure, firm performance, debt structure, real state

Shi,Q. (2023). Does the Capital Structure Influence the Firm Performance of Real Estate Listed Companies Positively Between 2010 to 2020 in China. Advances in Economics, Management and Political Sciences,7,76-81.
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References

[1]. Modigliani, F. and Miller, M.H.: The cost of capital, corporation finance, and the theory of investment: Reply.The American Economic Review 49(4),655-669(1959).

[2]. Agrawal A, Knoeber C R.:Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders.Journal of Financial & Quantitative Analysis 31(3),377-397 (1996).

[3]. Berger A N, Patti E B D.:Capital structure and firm performance: A new approach to testing agency theory and an application to the banking industry. Journal of Banking & Finance 30(4),1065-1102(2002).

[4]. Wei Xu , Ying Gao , Ying Xing.:Capital structure, equity structure, and business performance--an empirical study based on listed companies. Journal of Shanxi University of Finance and Economics(2005).

[5]. Feng Wang.:Research on the Correlation between Capital Structure and Company Performance - Empirical Data from China Travel Listed Companies.Economic Management(2007).

[6]. Dequan Yao, Xiaoxia Chen:A study on the correlation between capital structure and performance of media-listed companies. International Economic and Trade Exploration. (2018).

[7]. Booth, L., Aivazian, V., Demirguc‐Kunt, A. and Maksimovic, V.: Capital structures in developing countries.The journal of finance 56(1), 87-130(2001).

[8]. Huang S, & Song FM:The Determinants of Capital Structure: Evidence from China.China Economic Review, 17: 14-35(2006).

[9]. Pathak Rajesh:Capital Structure and Performance: Evidence from Indian Manufacturing Firms. Social Science Research Network, Online Web(2011).

[10]. Huayu Shen , Xiaohui Wu.: Information Asymmetry, Information Uncertainty and Profit Commitment in Directed Offerings. World Economy(2018).

Cite this article

Shi,Q. (2023). Does the Capital Structure Influence the Firm Performance of Real Estate Listed Companies Positively Between 2010 to 2020 in China. Advances in Economics, Management and Political Sciences,7,76-81.

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The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

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About volume

Volume title: Proceedings of the 2nd International Conference on Business and Policy Studies

ISBN：978-1-915371-41-6(Print) / 978-1-915371-42-3(Online)
Editor：Canh Thien Dang, Javier Cifuentes-Faura
Conference website: https://2023.confbps.org/
Conference date: 26 February 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.7
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Modigliani, F. and Miller, M.H.: The cost of capital, corporation finance, and the theory of investment: Reply.The American Economic Review 49(4),655-669(1959).

[2]. Agrawal A, Knoeber C R.:Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders.Journal of Financial & Quantitative Analysis 31(3),377-397 (1996).

[3]. Berger A N, Patti E B D.:Capital structure and firm performance: A new approach to testing agency theory and an application to the banking industry. Journal of Banking & Finance 30(4),1065-1102(2002).

[4]. Wei Xu , Ying Gao , Ying Xing.:Capital structure, equity structure, and business performance--an empirical study based on listed companies. Journal of Shanxi University of Finance and Economics(2005).

[5]. Feng Wang.:Research on the Correlation between Capital Structure and Company Performance - Empirical Data from China Travel Listed Companies.Economic Management(2007).

[6]. Dequan Yao, Xiaoxia Chen:A study on the correlation between capital structure and performance of media-listed companies. International Economic and Trade Exploration. (2018).

[7]. Booth, L., Aivazian, V., Demirguc‐Kunt, A. and Maksimovic, V.: Capital structures in developing countries.The journal of finance 56(1), 87-130(2001).

[8]. Huang S, & Song FM:The Determinants of Capital Structure: Evidence from China.China Economic Review, 17: 14-35(2006).

[9]. Pathak Rajesh:Capital Structure and Performance: Evidence from Indian Manufacturing Firms. Social Science Research Network, Online Web(2011).

[10]. Huayu Shen , Xiaohui Wu.: Information Asymmetry, Information Uncertainty and Profit Commitment in Directed Offerings. World Economy(2018).

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