Performance of the Swedish Real Estate Sector 1998-2002

Klaus Hammes and Yinghong Chen
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Klaus Hammes: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG
Yinghong Chen: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG

No 124, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: In this paper, we analyze the performance of the Swedish real estate sector by various profitability measures. We use an unbalanced panel of 781 non-listed companies from 1998 to 2000 with 3421 observations. There exists large regional and sectorial differences in performance but it is not due to regional or sectorial effect. Rather those differences can be largely explained by capital structure, tangibility and turnover of the firm, etc. We use both a single equations and a simultaneous equations approach to control for endogeneity and simultaneity. In the simultaneous equations framework we find a positive and significant effect capital structure on performance. Performance has a larger and significant effect on capital structure. The results indicate that banks and financial institutions lend more to profitable firms and firms with more tangible assets than otherwise. Tangible assets as ‘inventory’ contribute negatively to performance after taking into account the effect of capital structure on performance. We can conclude that tangible assets contribute to the profitability of a firm up to a point as collateral for bank loans. However, excessive tangible assets are negatively related to the profitability, at least for the shorter term. Our results stand the same even after controlling for regional differences and sub sectorial differences.

Keywords: Real Estate; Sweden; Panel Data; Performance; Simultaneous Equations (search for similar items in EconPapers)
JEL-codes: C23 C33 G30 L85 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2004-01-28
New Economics Papers: this item is included in nep-ure
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