Sharma, R K (2018) Factors affecting financial leveraging for BSE listed real estate development companies in India. Journal of Financial Management of Property and Construction, 23(3), pp. 274-294. ISSN 1366-4387
Abstract
Purpose: The real estate sector in India has assumed growing importance with the liberalisation of the economy. Developments in the real estate sector are being influenced by the developments in the retail, hospitality and entertainment (e.g. hotels, resorts and cinema theatres) segment, economic services (e.g. hospitals, schools) and information technology-enabled services (such as call centres), and vice versa. This paper aims to study the determinants of capital structure by taking into account 125 major Bombay Stock Exchange (BSE) listed real estate companies selected on the basis of their market capitalisation. Design/methodology/approach: To discover what determines capital structure, nine firm level explanatory variables (profitability-EBIT margin, return on assets, earnings volatility, non-debt tax shield, tangibility, size, growth, age debt service ratio and tax shield) were selected and regressed against the appropriate capital structure measures, namely, total debt to total assets, long-term debts to total assets, short-term debts to total assets, total liabilities to total liabilities plus equity, total debt to capital used and total debt to total liabilities plus equity. A sample of 125 real estate companies was taken and secondary data were collected. Consequently, multivariate regression analysis was made based on financial statement data of the selected companies over the study period of 2009-2015. Findings: The major findings of the study indicated that profitability, size, age, debt service capacity growth and tax shield variables are the significant firm-level determinants. Research limitations/implications: The present study is carried out by taking data of only 25 companies listed on the BSE and time period covered from 2009 from 2015. Time period and sample size may be limitations of the current study. Practical implications: The present study is an empirical analysis of the determinants of leverage of real estate sector in India with most recent available data. Different regression equations have been formed to develop the models using firm-specific determinants and different measures of leverage or capital structure. Data were regressed using SPSS application software, and the resulting (or obtained) regression outputs are analysed. This study will help the Indian real estate companies to the know the impact of different variables while raising short-term and long-term loans. Social implications: The current study will benefit all stakeholders of society who are fascinated to be acquainted with the financing of real estate companies and the factors affecting long-term and short-term financing of this sector. Specifically, public engrossed in different modes of investment and financial institution will be the prime gainers. Originality/value: The present study has been completed using authentic data from the annual reports and database. This study uses explanatory variables and different measures of leverage which were limited in use in previous studies. Moreover, this research is a comprehensive study that deals with developing different regression models by using diverse measures of leverage.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | assets tangibility; growth; leverage; size of firm; tax shield |
| Index terms: | annual report, India, information technology, real estate development, capital structure, sample size, secondary data, regression model, liberalization, determinant, methodology, financing, return on assets, database, real estate, liability, hotel, profitability, regression analysis, hospitality, society |
| Subjects: | statistical analysis, construction type, Geography, economic development, economic analysis, research methods, industry analysis, data management, computing systems, real estate economics, data collection methods, liability law, research design and methodology, risk assessment, communities and social development, business |
| Topics: | Legal Issues, Research Practice, Stakeholder Management, Urban Studies, Risk Management, Construction Technology, Geographical Context, Governance, Digital Applications, Business Strategy |
| Descriptive scope: | 5 PCTEA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here