Selected Determinants Of Capital Structure Of Listed Real Estate Companies In China

MM capital structure theory is the most important cornerstone of modern corporate finance theory. The academic debates on how to choose the capital structure have never stopped since its inception. Real estate, as a pillar industry of the Chinese economy, has an obvious characteristic of being capital-intensive. The late establishment of capital market in China and the lack of a comprehensive legal framework further increased the complexity of its capital structure. The above factors show that researches on real estate industry's capital structure have both theoretical and practical importance, especially against the backdrop of the sub-prime crisis.With the learning from domestic and foreign scholars'research combined with the characteristics of financing of China's real estate industry, this paper studied 32 Chinese real estate companies that went public before 1999.Based on the data over the period of 1999 to 2008,the paper builds a model that studies the determining factors of capital structure decision and does empirical research on factors that determines the capital structure of Chinese listed real estate companies. Research shows:1)The debt ratio of listed real estate companies is generally higher than that of non-financial industries and it rises every year.2) Real estate companies uses more bank loans than other debt financing methods;short-term loan is larger than long-term loan, yet short-term loan is going down while long-term loan is on the rise.3)Additional stock offering takes the biggest portion of equity financing. It is positively correlated with the bullishness of capital market.4) It is not representative to illustrate capital structure theory by using debt ratio as a proxy variable of leverage level of listed real estate companies.5)No significance is found on the impact of capital structure of listed real estate companies by majority shareholding, profitability, growth potential and geographical difference.6) Company scale and leverage ratio of listed real estate companies show significant positive correlation.7) Asset collateral value and leverage ratio of listed real estate companies show significant negative correlation.