The Impact of Capital Structure on Firm Performance in Real Estate Companies in China

Abstract

Capital structure has been in the focus of academic research ever since MM theory was put forward. With the rapid development of Chinese economy, thus this research explores the impact of capital structure on firm performance of listed companies. This research adopted Decision-making Theory as theoretical underpin which expected rational shareholder to seek for the most appropriate capital structure in their context. This archival research analyzed capital structure of real estate listed companies in Shanghai and Shenzhen Stock Exchange between 2017 and 2021 using Refinitiv Eikon database. The empirical multivariate regression evidences reveal that total asset-liability ratio, equity ratio, long-term debt ratio, has direct impact on ROA, at the significant level of 0.05. The finding reveals that higher debt during the period harm the performance of the firm in real estate industry.