Investigating the Capital Structure of UK Real Estate Companies

Authors: Westgaard, Sjur; Eidet, Amund; Frydenberg, Stein; Grosås, Thor Christian

Source: Journal of Property Research, Volume 25, Number 1, March 2008 , pp. 61-87(27)

Publisher: Routledge, part of the Taylor & Francis Group

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Abstract:

This paper investigates determinants of capital structure in 308 UK real estate companies. The data panel consists of accounting data from the fiscal years 1998-2006. By using panel data regression we find the significant factors influencing the capital structure of the selected companies. Profitability, tangibility and size are positively related to leverage, while asset turnover and earnings variability are negatively related. The significant positive relation of profitability contradicts major findings in the capital structure literature. Both the static trade-off theory and the pecking order theory are supported by the signs of the determinants, however the former corresponds most. A supplementary finding is that UK real estate companies face large adjustment costs.

Keywords: Capital structure; trade-off theory; pecking order; unlisted companies

Document Type: Research article

DOI: http://dx.doi.org/10.1080/09599910802397107

Affiliations: 1: Trondheim Business School and Norwegian University of Science and Technology - Department of Industrial Economics, Norway

Publication date: 2008-03-01

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