An Empirical Study On Corporate Real Estate And Stock Market Performance

Corporate real estate refers to the land and buildings owned by not-real estate companies for operational and development purposes. In today's business activities, as the real estate develop and the price of the property increase, property assets have become an important part of the corporate assets. As a key component of corporate assets, the importance of real estate must first be clearly recognized by corporate management. Therefore, the research on corporate real estate is important for corporate management, particularly for those non-real estate companies.This paper introduced the conception of the corporate real estate and summarized the researches on corporate real estate. The research covered a period of five years from 2001 to 2005.A sample of 139"property intensive"firms from 14 China non-real estate industries was included in the study. The research was divided into two parts:In the first part the paper analyzed the property asset holding and property asset intensity for sample firms in China .It provided an in-depth analysis of importance of corporate real estate by industry sector and asset subtype. The results showed that corporate real estate holding increased as real estate market developed in China for these years. There were remarkable differences for the property intensive between difference industries.In the second part, for each firm, this paper estimated and compared four performance measures: medium return, standard deviation (a proxy for total risk),systematic risk (beta) and Jensen abnormal return index for the"with real estate"and"without real estate"return series, to examine if real estate give the positive effects on the stock market of these firms. The"with real estate"return series included the real estate impact on the equity market. The"without real estate"return series was derived by removing the influence of the real estate market from the"with real estate"returns. I used the Shanghai composite index to proxy for the"market", and used the office property price index to proxy for corporate real estate performance. The results for both the nominal returns and inflation-adjusted returns are reported. There is some evidence of higher average returns, higher risks, higher systematic risk and higher abnormal return performance associated with corporate real estate asset ownership.