Research On Effects Of Debt Financing Of Listed Real Estate Companies Based On Signaling Game

Industry of real estate is an important one. As the the most commonly used methodof financing, debt financing can influence not only real estate companies but also thesafety of the whole economics. Research of debt financing effects can rich relatedtheory and give actual draw to daily operations.According to the development circumstance and characteristic of industry of realestate, macro analysis of real estate data is made. It is known to all that debt ratio of realestate industry is higher than others. Taking this into account and combined withsignaling game theory, the issue of debt financing effects of manager compensation,market value and financial performance. The method of theoretical study and empiricalstudy are used.The relationship between manager compensation and debt ratio isconsidered as internal game between managers and owners. The relationship betweenmarket value and debt ratio is considered as external game between managers andinvestors.The performance is considered as the appearance of game. Taking advantageof multiple linear regression, the game of manager compensation, market value andfinancial performance with debt financing ratio is studied. Simultaneous equationsmodel is used to analyse the economic system of these index. We try to find theinterdependent relationship between manager compensation, market value, financialperformance and debt financing ratio qualitatively and quantitatively. Pros and cons andcauses of research result are analysed. Combined with the related theory and marketcondition, targeted advices are put forward.The research result shows that in real estate companies of well operated, managercompensation and debt financing ratio are positively correlated with each other, notsignificantly. Debt ratio and financial performance are also non-significantly andpositively correlated with each other. While in real estate companies of poorly operated,manager compensation and debt financing ratio are negatively correlated with eachother, significantly. Debt ratio and financial performance are significantly and positivelycorrelated with each other. In all these chosen real estate companies, debt financing ratioinfluences market value positively while market value influences debt financing rationegatively. Using these indexes to build a macro economic system and analyzing thesystem, we can find that manager compensation plays an important role in the development of real estate companies. According to the result, strengthening agencyrelationship and making an explicit plan for funds can solve the negative effects ofinternal game. To solve the negative effects of external game, listed real estatecompanies should provide room for investors and creditors to supervise the companies’financing and operation. In addition, listed real estate companies should balancelong-term debt and short-term debt.