Effect of Capital Structure (CS) on Financial Performance (FP) of Chinese Listed Real Estate Companies (CLRECs)

Abstract

This research tests the effect of capital structure (CS) on financial performance (FP) based on a sample of 24 CLRECs during 2015-2019. Statistical results show that short-term debt ratio (STDR), long-term debt ratio (LTDR) and total debt ratio (TDR) all have significantly negative effect on return on assets (ROA), return on equity (ROE) and on earnings per share (EPS). The research conclusions offer empirical evidence supporting the bankruptcy theory. As such, CLRECs shall optimize CS, changing the over high debt ratio, reducing the over dependence on bank loans, and extending channels and means of financing, so as to improve performance.