Investigating the determinants of capital leverage: the case of China's real estate sector

Korhan Gokmenoglu and Mohamad Kaakeh

International Journal of Economics and Business Research, 2020, vol. 20, issue 3, 288-309

Abstract: This study empirically investigated the determinants of capital leverage of the Chinese real estate sector. Annual panel data of 130 companies covering the period 2007-2017 were used. Profitability was treated as a latent variable to avoid any specification error. Structural equation modelling (SEM) confirmed that while the size and financial cost have a significant positive effect on the level of capital leverage; liquidity, tangibility, and non-debt tax shield (NTDS) have a significant negative effect. The findings provide supportive evidence for both the trade-off theory and the pecking order theory. An interesting outcome of our research is that despite the substantial difference in institutional structure between China and Western countries, the firm-specific determinants of leverage are partially similar between the two. The policy implications of our research are discussed in the conclusion section.

Keywords: SEM; structural equation modelling; capital structure; leverage; real estate sector; Chinese firms; trade-off theory; picking order theory. (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.inderscience.com/link.php?id=110437 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:ijecbr:v:20:y:2020:i:3:p:288-309

Access Statistics for this article

More articles in International Journal of Economics and Business Research from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().