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Capital Structure Determinants in Real Estate Limited Partnerships

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  • Allen, Marcus T

Abstract

This paper models the capital structure decision facing partnerships and tests the implications using panel-data regression analysis for a sample of real estate limited partnerships. The model shows that if an optimal capital structure exists for non-taxed firms, it is a function of personal tax effects, costs of financial distress, and substitute tax shields. The empirical tests indicate a positive relationship between leverage and the proportion of real estate assets held, and a negative relationship between leverage and both growth rates and non-debt tax shields. Furthermore, the findings suggest that changes resulting from the Tax Reform Act of 1986 are positively related to partnership leverage. Copyright 1995 by MIT Press.

Suggested Citation

  • Allen, Marcus T, 1995. "Capital Structure Determinants in Real Estate Limited Partnerships," The Financial Review, Eastern Finance Association, vol. 30(3), pages 399-426, August.
    • Handle: RePEc:bla:finrev:v:30:y:1995:i:3:p:399-426
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    Cited by:

    1. Enjolras, G. & Sanfilippo, G., 2018. "The role of debt in financing French farm investments," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277006, International Association of Agricultural Economists.
    2. Seung Dong You, 2014. "The Leveraged City," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 42(4), pages 1042-1066, December.
    3. Le, Hoang Duc & Viet, Nguyen Quang & Anh, Nguyen Huaong, 2021. "Trade-Off Theory and Pecking Order Theory: Evidence from Real Estate Companies in Vietnam," OSF Preprints hc6ne, Center for Open Science.
    4. Sufian Radwan Almanaseer, 2019. "Determinants of Capital Structure: Evidence from Jordan," Accounting and Finance Research, Sciedu Press, vol. 8(4), pages 186-186, November.
    5. Kuang Kuang Deng & Siu Kei Wong & Kwong Wing Chau, 2018. "Institutions and Capital Structure: The Case of Chinese Property Firms," The Journal of Real Estate Finance and Economics, Springer, vol. 56(3), pages 352-385, April.
    6. Dow,Gregory K., 2019. "The Labor-Managed Firm," Cambridge Books, Cambridge University Press, number 9781107589650.
    7. Sjur Westgaard & Amund Eidet & Stein Frydenberg & Thor Christian Grosås, 2008. "Investigating the Capital Structure of UK Real Estate Companies," Journal of Property Research, Taylor & Francis Journals, vol. 25(1), pages 61-87, August.
    8. Oscar Briones & Melisa Chang, 2017. "Capital Structure Determinants Influence: A Comparative Study," Proceedings of International Academic Conferences 5007097, International Institute of Social and Economic Sciences.
    9. Gregory Dow, 2014. "Partnership markets with adverse selection," Review of Economic Design, Springer;Society for Economic Design, vol. 18(2), pages 105-126, June.

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