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Performance of the Swedish Real Estate Sector 1998-2002

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Author Info

  • Hammes, Klaus

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

  • Chen, Yinghong

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

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    Abstract

    In this paper, we analyze the performance of the Swedish real estate sector by various profitability measures. We use an unbalanced panel of 781 non-listed companies from 1998 to 2000 with 3421 observations. There exists large regional and sectorial differences in performance but it is not due to regional or sectorial effect. Rather those differences can be largely explained by capital structure, tangibility and turnover of the firm, etc. We use both a single equations and a simultaneous equations approach to control for endogeneity and simultaneity. In the simultaneous equations framework we find a positive and significant effect capital structure on performance. Performance has a larger and significant effect on capital structure. The results indicate that banks and financial institutions lend more to profitable firms and firms with more tangible assets than otherwise. Tangible assets as ‘inventory’ contribute negatively to performance after taking into account the effect of capital structure on performance. We can conclude that tangible assets contribute to the profitability of a firm up to a point as collateral for bank loans. However, excessive tangible assets are negatively related to the profitability, at least for the shorter term. Our results stand the same even after controlling for regional differences and sub sectorial differences.

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    File URL: http://hdl.handle.net/2077/2795
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    Bibliographic Info

    Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 124.

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    Length: 27 pages
    Date of creation: 28 Jan 2004
    Date of revision:
    Handle: RePEc:hhs:gunwpe:0124

    Contact details of provider:
    Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
    Phone: 031-773 10 00
    Web page: http://www.handels.gu.se/econ/
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    Related research

    Keywords: Real Estate; Sweden; Panel Data; Performance; Simultaneous Equations;

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    1. Anup Agrawal & Charles R. Knoeber, . "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders (Revision of 29-94)," Rodney L. White Center for Financial Research Working Papers 8-96, Wharton School Rodney L. White Center for Financial Research.
    2. Majumdar, Sumit K & Chhibber, Pradeep, 1999. " Capital Structure and Performance: Evidence from a Transition Economy on an Aspect of Corporate Governance," Public Choice, Springer, vol. 98(3-4), pages 287-305, March.
    3. Loderer, Claudio & Martin, Kenneth, 1997. "Executive stock ownership and performance Tracking faint traces," Journal of Financial Economics, Elsevier, vol. 45(2), pages 223-255, August.
    4. Baltagi, Badi H. & Chang, Young-Jae, 1994. "Incomplete panels : A comparative study of alternative estimators for the unbalanced one-way error component regression model," Journal of Econometrics, Elsevier, vol. 62(2), pages 67-89, June.
    5. Demsetz, Harold & Villalonga, Belen, 2001. "Ownership structure and corporate performance," Journal of Corporate Finance, Elsevier, vol. 7(3), pages 209-233, September.
    6. Mehran, Hamid, 1995. "Executive compensation structure, ownership, and firm performance," Journal of Financial Economics, Elsevier, vol. 38(2), pages 163-184, June.
    7. Boozer, Michael A., 1997. "Econometric Analysis of Panel Data Badi H. Baltagi Wiley, 1995," Econometric Theory, Cambridge University Press, vol. 13(05), pages 747-754, October.
    8. Baltagi, Badi H. & Chang, Young-Jae, 2000. "Simultaneous Equations With Incomplete Panels," Econometric Theory, Cambridge University Press, vol. 16(02), pages 269-279, April.
    9. Agrawal, Anup & Knoeber, Charles R., 1996. "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(03), pages 377-397, September.
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