Investigating the Capital Structure of UK Real Estate Companies

Sjur Westgaard, Amund Eidet, Stein Frydenberg and Thor Christian Grosås

Journal of Property Research, 2008, vol. 25, issue 1, 61-87

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.

Date: 2008
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DOI: 10.1080/09599910802397107

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