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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. Seung Dong You, 2014. "The Leveraged City," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 42(4), pages 1042-1066, December.
    2. 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.
    3. Gregory Dow, 2014. "Partnership markets with adverse selection," Review of Economic Design, Springer;Society for Economic Design, vol. 18(2), pages 105-126, June.
    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. 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.
    6. 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.
    7. 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.
    8. Dow,Gregory K., 2019. "The Labor-Managed Firm," Cambridge Books, Cambridge University Press, number 9781107589650, September.
    9. 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.

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