Corporate Real Estate, Capital Structure and Stock Performance: Evidence from China

Hongyan Du () and Yongkai Ma ()
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Hongyan Du: PhD candidate at the School of Management and Economics, University of Electronic Science and Technology of China
Yongkai Ma: Professor and Vice Dean of the School of Management and Economics, University of Electronic Science and Technology of China. Address: No.4, Section 2, North Jianshe Road, Chengdu, P.R.China

International Real Estate Review, 2012, vol. 15, issue 1, 107-126

Abstract: This paper attempts to study the relationships among corporate real estate (CRE), capital structure and stock performance of China¡¦s non-real estate firms, including the bidirectional relationships between debt ratio (DR) and corporate real estate ratio (CRER), the impact of CRER on stock performance, and whether this impact differs across firms with different debt levels. The results show that for the overall sample, DR has a positive effect on CRER, while CRER negatively affects DR. CRER has no significant positive impact on the abnormal returns of stocks, and even decreases those for firms in the information industry. However, it can significantly reduce the systematic risks of stock returns. Moreover, we find that CRER has no significant effect on abnormal returns regardless of the amount of debt level that a firm has, and there is no significant difference between the effects of CRER on abnormal returns for firms with different levels of debt. On the other hand, the effect of CRER on systematic risk is significantly negative for firms in the low debt group, and insignificantly positive for firms in the high debt group. The CRER of lower debt firms can significantly reduce much more systematic risk than that of the high debt firms.

Keywords: Corporate real estate; Capital structure; Stock performance (search for similar items in EconPapers)
JEL-codes: L85 (search for similar items in EconPapers)
Date: 2012
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