A Study On The Financing Structure Of The Listed Real Estate Company In China

The aim of this paper is to study the financing structure of the listed real estate companies,to analyze the features of the financing structure and the relationship between the financing structure and corporate performance, in order to build the theoretical model of the financing structure of the listed real estate companies in China and to provide the reference for building the financing model of real estate sector which is appropriate in the Chinese context.Main western theories on financing structure include theory of MM, the equilibrium theory and the modern theory on financing structure based on unsymmetrical information. This study is based on the equilibrium theory. In this study, financing of companies is divided into internal financing and external financing. The internal financing consists of the reserve of company profit and depreciation. And the external-financing is composed by liabilities and stock. In this paper, the debt/asset ratio (DAR) is used as the scale index of financing structure. The return on assets (ROA), chief business profit margin (CPM) and Tobin's Q as the scale index of performance are used to measure the corporate performance. Using data of the balance sheets from 2001 to 2006 of sample companies which are 54 listed real estate companies, with the descriptive statistical analysis and linear regression model, we obtained the following conclusions: 1) In comparison with the listed companies in other sectors, the liabilities of listed real estate companies are higher than any other industry (expect banking); 2) The liabilities mainly come from bank loans; the first financing choice is liabilities, then comes stock, and the last one is internal financing; 3) The relation between DAR and the corporate performance is negative, the liabilities increased and the corporate performance decreased; 4) There exists an area of optimal financing structure (between 43.34% and 59.95%), that can get the best corporate performance. Based on the research results, it puts the policy suggestion that the way out of high liabilities is to build the multi-channel financing system in real estate industry.