The Influence of Capital Structure of Real Estate Enterprise on Stock Fluctuation

DOI

10.2991/aebmr.k.220307.348How to use a DOI?

Keywords

Finance; Real estate; Capital structure; Corporate finance; deleveraging; Stock Volatility; Corporate debt ratio

Abstract

As one of the pillar industries in every country, the real estate industry is characterized by a significant capital demand. Daily corporate governance and operation require a large amount of capital. Therefore, high leverage is one of the essential financing methods in the real estate industry. However, the debt ratio of the real estate industry has generally exceeded the normal range. The high debt ratio makes the capital structure unreasonable and increases enterprises’ financing costs and operational risks. Stock volatility is considered to be one of the vital means to measure the business risk of enterprises, and continuous high stock volatility is not conducive to the long-term stable development of enterprises. This paper focuses on the comparative analysis of real estate industry data in the United States and China, establishes a fixed-effect model to study the impact of corporate debt ratio on stock market volatility, and discusses whether deleveraging can optimize capital structure. The fixed-effect model reflects that a high debt ratio increases stock price volatility, and debt ratio is positively correlated with stock price volatility. Moreover, the debt ratio of American enterprises has a more significant positive impact on stock volatility compared with Chinese enterprises. Therefore, this paper suggests that the future development of the real estate industry can optimize the capital structure of enterprises by deleveraging to reduce operating risks.

Copyright

© 2022 The Authors. Published by Atlantis Press International B.V.

Open Access

This is an open access article under the CC BY-NC license.

Download article (PDF)

TY  - CONF
AU  - Yan Zhang
PY  - 2022
DA  - 2022/03/26
TI  - The Influence of Capital Structure of Real Estate Enterprise on Stock Fluctuation
BT  - Proceedings of the 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022)
PB  - Atlantis Press
SP  - 2122
EP  - 2129
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.220307.348
DO  - 10.2991/aebmr.k.220307.348
ID  - Zhang2022
ER  -