Financial Structure of Real Estate Corporations: Some International Evidence

This paper provides a more comprehensive understanding on the corporate financial policies of real estate organizations by examining the capital structure practices of real estate corporations across different markets and over time. The empirical evidence, based on fourteen markets in Europe and Asia Pacific, indicates that firm size, asset structure and corporate performance are significant in explaining cross-sectional differences in capital structure. Taxation, however, is not significant. From a dynamic perspective, firm characteristics have limited ability to explain year-on-year changes in leverage. In this respect, macroeconomic factors are more relevant in explaining capital structure variations across time. Although they are not significant in explaining the total change in debt ratios, firm characteristics have significant impact on the net equity and retained earnings decisions of real estate organizations. The empirical evidence suggests that large and profitable real estate organizations issue more external equity capital. Firms holding more tangible assets issue equity less frequently to avoid any dilution in their stakes.