The Financialisation of Real Estate Firm Investment Behaviour – Evidence from a Panel of Real Estate Developers in selected ASEAN economies

The effects of financialisation on the investment behaviour of non-financial firms have become the subject matter of some recent studies. Another strand of the literature focuses on the implications of sector-specific (particularly the housing sector) financialisation. This study combines these two strands of literature by estimating the impact of financialisation on the investment behaviour of a panel of real estate firms in Malaysia, Thailand and the Philippines. The study extends the current knowledge of this subject area by enabling a more micro-level analysis of real estate firm behaviour that uses accounting data, while also drawing important observations about the similarities and differences in how real estate firms in various countries respond to financialisation. Our main findings can be summarised as follows. First, financialisation has a negative effect on the investment behaviour of real estate firms in Malaysia and the Philippines, but not Thailand. Second, past investment decisions, profitability and sales performance tend to reinforce current investment behaviour. Third, increased past leverage discourages investments. The negative impact of financialisation on investment in Malaysia and the Philippines could imply that more financialisation is associated with a tendency to reduce investments in construction activities in these countries. Some recommendations for policy are proposed.