Before and after the Global Financial Crisis: capital structure comparison of European property companies

Real estate is an industry that deserves some attentions to capital structure due to its own peculiarities. As a consequence, existing relevant literature and research is abundant of analyses that are focused on this industry as well. However, such studies have been centered mainly in the more developed USA market and, because the Global Financial Crisis of late 2000s is a relatively a recent event, research has not yet much considered how this phenomenon has impacted on corporate financing decisions.This study is based on the 68 European publicly listed companies that have been continuously included in the EPRA/NAREIT Europe Index for the 10-year period from 2003 through 2012. Asset Size, profitability, growth opportunities, cost of debt, ownership and risk are considered as the variables that can best help explain the capital structure of such companies. On this purpose, a panel regression model with such variables will be employed. The impact of the GFC on their capital structure will be included by means of a temporal dummy variable. The implications of the empirical findings will be interpreted in light of the three major theories and the prevalent literature about financing decisions.It will be illustrated that the six variables entered in the model can be used to get a better understanding of the capital structure of the companies in the EPRA/NAREIT Europe Index. The findings of this study are indicative of the fact that the GFC has had a significant impact on the financing decisions of such companies. The inclusion of the impact of the GFC is certainly an element of innovativeness for the studies of this type, and this is particularly true considering that the results will show that some variables have acted differently before and after the burst of the GFC. In this sense, this research adds much on existing literature about corporate finance and in particular on that literature focused on the real estate industry.