Factors Affecting Leveraging for Quoted Real Estate Development Companies in China

Lunani Abiud Simiyu, Xuexi Huo


Real estate companies in China need to undertake capital restructuring by deepening and broadening additional sources of funding such as real estate investment trusts, venture capital, mezzanine financing and commercial mortgage backed securities. This study is aimed at analyzing the factors that influence leveraging among quoted real estate development companies in China. A sample of 90 real estate companies quoted on Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange(SZSE) for the period covering 2005 to 2011 was selected however, due to information inadequacy, only 68 samples were analyzed using fixed effects regression. The results exhibited the following; management experience, company size, “guanxi” common in china meaning (personal/business relationship), company growth, company profitability, asset tangibility were positive and significant to leverage, whereas; interest amount was negative and significant, business risk and company age were negative and insignificant to the company leverage. In overall, the outcome of the research is in line with predictions from various documented theories and previous works.

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DOI: https://doi.org/10.5539/ijef.v5n7p85

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