The Study On The Optimal Capital Structure Of The Listed Real Estate Corporations

In recent years, Chinese real estate industry has developed rapidly and it hasbecome an important industry in the national economy. The healthy development of thereal estate industry has a profound impact on people’s living and the stability ofmacroeconomic. Real estate industry has huge investment, long payback period, higherrisk and other characteristics. So it’s important to study the capital structure of the realestate business, analyze the relationships between capital structure and operatingperformance, and optimize the capital structure. This will helps enterprises raise fundsin a more reasonable manner and increase the enterprises’ value. This study also helpsstakeholders (as upstream and downstream enterprises, banks, shareholders, etc.) toadjust their behavior. Listed real estate companies are representatives of the real estateenterprises in China. So the study of the listed real estate corporations’ capital structurecan help most of the non-listed real estate companies optimize their capital structure.Over the years, there are many theoretical and empirical researches on capitalstructure. Foreign development of the theories is relatively mature. But China’seconomic development and market economic system are not as perfectly as foreigncountries, the western capital structure researches can not be well suited to Chineseenterprises. The research literatures on the capital structure of Chinese real estateindustry are even less, therefore, there is an urgent need for the in-depth study.The paper is based on the relevant theoretical and empirical researches and theanalysis of the status of the capital structure to find the factors which affect capitalstructure. Correlation and regression analysises between capital structure and financialperformance tell writer the way to optimize capital structure. According to the furtherbreakdown of listed real estate companies, writer selects the optimal capital structure foreach specific circumstance and provide a reference for a large number of non-listed realestate companies. According to the size, all listed real estate companies have dividedinto three categories by factor analysis and cluster analysis. First class (large-scale), theoptimal capital structure is65%-80%;second class (small-scale), the optimal capitalstructure is50%-70%; third class (medium-scale), the optimal capital structure is60%-90%.The writer obtains satisfactory results by the empirical test of ST listed real estatecompanies. Most of the non-listed real estate companies have smaller scales, so theyshould pay special attention to their own operating conditions, due to lower capital structure to reduce financial risk. Finally, this paper gives some correspondingrecommendations to optimize the capital structure.