Growth and Capital Structure of the Listed Chinese Real Estate Firms: An Empirical Investigation
Posted: 29 Nov 2010
Date Written: November 29, 2010
The Chinese economy has posted an average annual growth rate of around 10% for at least a decade now. The boom in real estate is one of the most visible symbols of China’s steps to become an economic and political giant in this century. This paper examines empirically the determinants of capital structure of all the listed real estate companies in China between 1992 and 2001. We find evidence that is remarkably consistent with Myers (1977) growth options arguments. The listed real estate companies are large, mature, and formerly state-owned enterprises in which the State still maintains a large and illiquid ownership position. Yet, evidence for the Myers model on them is stronger than that on the listed entrepreneurial private firms, which are young and without direct state ownership. The macroeconomic boom, especially in real estate development, is offering the listed real estate firms significantly valuable growth opportunities in China. (A Note to the Members of the Conference Committee: The submitted version of our paper covers the period of 1992-2001.) We have just completed data collection for the period of 2002-2009 and are in the process of incorporating new results from this period into our paper. Thus, reported results and discussions in this version are preliminary though hold for the period of 1992-2001. The updated version will still report the current results under a sub-period analysis. We are totally confident that we will have a complete paper for the entire period of 1992-2009 within a few months.
JEL Classification: F2
Suggested Citation: Suggested Citation