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The Relationship Between Capital Structure and Performance of Real Estate Companies in China

In: Comparative Analysis of Trade and Finance in Emerging Economies

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  • Yitao Jiang
  • Jianing Zhang

Abstract

In view of the significant changes in the capital structure of China’s real estate industry and enterprises in recent years, this chapter employs financial indicators and the linear regression function to analyze the relationship between corporate debt ratio and the performance of 111 A-share listed real estate enterprises in China. This study finds that the corporate debt ratio of China’s real estate enterprises in the past decade has a significant negative impact on enterprises’ performance. The study also finds that among China’s real estate companies, the corporate debt ratio has a more significant negative impact on the performance of non-state-owned enterprises than state-owned enterprises. In addition, a high debt ratio has a more significant negative impact on return on equity (ROE) than on return on assets (ROA). However, when Tobin’sQserves as a proxy for firm performance, the negative impact of the corporate debt ratio becomes insignificant in the presence of the firm size factor. The research results of this chapter can provide some reference for subsequent policy-making and investment decisions in the Chinese real estate market.

Suggested Citation

  • Yitao Jiang & Jianing Zhang, 2023. "The Relationship Between Capital Structure and Performance of Real Estate Companies in China," International Symposia in Economic Theory and Econometrics, in: Comparative Analysis of Trade and Finance in Emerging Economies, volume 31, pages 217-233, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:isetez:s1571-038620230000031028
    DOI: 10.1108/S1571-038620230000031028
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    More about this item

    Keywords

    Firm performance; corporate debt ratio; real estate; state-owned companies; capital structure; return on assets; G32; O16;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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