An empirical study of debt-equity ratios in retail and construction industries

• Main Authors: Ang, Geok Sim, Ho, Yen Theng, Ou, Yang Eling
• Other Authors: Nanyang Business School
• Format: Final Year Project
• Language: English
• Published: 2013
• Subjects: DRNTU::Business
• Online Access: http://hdl.handle.net/10356/51460
• Institution: Nanyang Technological University

This report presents the findings of an empirical study on the debt-equity ratios of the retail and construction companies in Singapore. This study attempts to relate finance theories with real life evidence in the Singapore context. Based on data collected from the 1993 and 1994 financial highlights of retail and construction companies registered with the Registry of Companies and Businesses, analyses were carried out to determine the presence of an industry norm in capital structure in thetwo industries. A comparison of the industry norms between the two industries was also made. Further studies were also conducted to determine whether there is any correlation between the debt-equity ratio of companies and the factors, total size and stage of business development. Generally, it was found that an industry norm in capital structure exists in the retail and construction industries respectively. The factors, total assets and years of establishment, were found to have no impact on the debt-equity ratios ofthe firms in either industry. In addition, we also verified that debt-equity ratios vary across the two industries. Although the use of two industries does not allow convincing generalization to be made across industries, the evidence obtained generally support the existence of an industry norm in capital structure.