Internal liquidity, capital structure and firm profitability: a case for the South African listed real estate industry
Date
2013-07-26
Authors
Cook, Adam Barry
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Abstract
This study analyses data for the top ten listed real-estate firms in South Africa to examine the relationships that exist between Internal Liquidity, Capital Structure and Firm Profitability. The ten firms under study represent 79% of the industry by market capitalisation. Other than in six unique cases out of the thirty regressions run, results show that there is little relationship between the variables. These six however, all fall within the test of Internal Liquidity on the firm’s Capital Structure. Results indicate that the level of Internal Liquidity has explanatory power on the level of debt used by the listed real-estate firm. Interestingly, results also show that the market’s perception of a listed real-estate firm is independent of its capital structure and its cash on hand. It is further implied that firms in South Africa with property as the majority asset, are under-geared as a result. This study supports the stakeholder co-investment theory to explain the low average debt levels in South Africa.
Description
Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2012.
Keywords
Real estate, Capital structure, South Africa, Profitability