Chiang, Y H; Cheng, E W L and Lam, P T I (2010) Epistemology of capital structure decisions by building contractors in Hong Kong. Construction Innovation, 10(3), pp. 329-345. ISSN 1471-4175
Abstract
Purpose – This paper aims to identify a set of potential determinants of capital structure. By knowing the key determinants, it is possible to understand how building contractors make decisions on capital structure. Design/methodology/approach – A questionnaire survey was conducted to solicit Hong Kong building contractors' view on the predictive power of a set of financial ratios on capital structure. Each of the seven proxies of capital structure was regressed on the five financial ratios. The usual diagnostic tests (i.e. DurbinWatson and variance inflation factor tests) and plots of residuals and normality were carried out to ensure that assumptions of linear regression analysis were met. To validate the findings, eight contractors were further interviewed. Findings – Both measures of longterm debts (i.e. “longterm debt divided by total assets” and “longterm debt divided by total debt”) are proven to be related to “tangibility” significantly. Also, perceived growth opportunities are significantly related to three proxies for capital structure (i.e. total debt to capital, longterm debt and longterm leverage). Research limitations/implications – Further research should be undertaken to improve the quality of data and to enrich the understanding of how contractors define their capital structures. Originality/value – Despite a plethora of research having been done by financial researchers, there are very few relevant papers in the construction field. This paper is intended to explore how building contractors made decisions on capital structure.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | capital structure; construction industry; contract workers; decision making; financing; Hong Kong |
| Index terms: | survey, financial ratio, financing, inflation, methodology, decision-making, questionnaire, variance, Hong Kong, building contractor, epistemology, determinant, construction industry, regression analysis, capital structure |
| Subjects: | industry analysis, statistical analysis, decision analysis, measurement and scaling, Geography, research methods, economic analysis, knowledge theory, practitioner, risk assessment, data collection methods |
| Topics: | Research Practice, Geographical Context, Business Strategy, Risk Management, Roles and Professions |
| Descriptive scope: | 5 PCTEA |
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