Impact of capital structure on the financial performance of selected publicly-listed real estate firms in the Philippines

• Main Authors: Angulo, Justine Marie R., Beltran, Enrique A., Cadauan, Michelle E., Escriba, Janelle Anne R.
• Format: text
• Language: English
• Published: Animo Repository 2012
• Subjects: Real estate business > Philippines; Real estate management > Philippines; Accounting
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/10806
• Institution: De La Salle University

This study examines the impact of capital structure on financial performance of selected real estate firms using a sample of 10 publicly-listed firms in the Philippine Stock Exchange during the five year period, 2007-2011. Pooled data for the selected firms were generated and analyzed using the ordinary least-squares (OLS) regression as a method of estimation. Six independent variables (leverage, tangibility, size, risk, growth and tax), used as determinants of capital structure, were initially tested for their predicting ability on the financial performance models but only leverage, risk and size were found to have a significant impact. Thus, the other insignificant independent variables were dropped as part of the determinants of capital structure. The result shows that a firm's capital structure as determined by using leverage and risk for the Return on Equity (ROE) Model while using leverage and size for the Return on Assets (ROA) Model has a significant impact on the firm's financial measures. Specifically, leverage has a significant negative impact on the performance measure on both of the models while risk and size have significant positive impact using the ROE and ROA model, respectively. The study of these findings indicates support with prior empirical studies specifically, the Dynamic Trade off theory but opposes with Agency theory and Capital Structure Irrelevance Theory.