China’s Real Estate Enterprise Capital Structure And Business Performance

As the degree of national macro-control on the real estate market has become more and more severe, financial problems of the real estate enterprises are becoming more and more prominent. The government wants the real estate enterprises have more specification and good operation, not meaning to force the real estate business failures in regulating the real estate enterprise. In order to survive from the national macroeconomic regulation, real estate enterprise must change the past extensive mode of development. It needs to improve capital utilization efficiency, optimize capital structure, choose appropriate financing way, so as to improve the business performance of enterprises. This article needs to solve the two core issue is whether China’s real estate enterprise existence of the optimal capital structure and how to improve the operating performance of enterprise through the optimization of China’s real estate enterprise’s capital structure.In this paper, it analyzes the capital structure’s influence on real estate enterprise business performance on the basis of the collected data of Chinese listed real estate, using GMM model. It shows that the capital structure of real estate enterprises affects the business performance depending on the different phases. When enterprise’s debt ratio is low, it can improve the operating performance of enterprises by increasing the ratio of debt in capital structure. It is better for controlling the cost of capital which is a key factor in improving enterprise operating performance. The average cost of debt financing is lower than equity financing. However, the increase in debt financing will enhance the enterprise the bankruptcy costs and take the negative impact on enterprise’s business performance. For real estate enterprises, therefore, there is an optimal capital structure which makes real estate enterprise’s business performance to achieve the highest level. On the whole, China’s real estate enterprise is excessive depending on bank indirect financing and direct financing is insufficient.However, there is bigger difference about economic characteristics among eastern, central and western China which leads to different capital structure in the optimization of real estate enterprise. This paper analyzes the influence of capital structure and equity structure on the real estate business performance in31provinces divided to eastern, central and western areas. Totally speaking, the regional environment and the characteristics of the enterprise play a lion role in the capital structure optimization. The real estate enterprises in the eastern area should further emphasize the indirect financing which can improve the operating performance of enterprises through commercial bank loans to obtain cheaper funding support. The real estate enterprises in the middle and western area expand direct financing channels and actively obtain money from capital markets which can enlarge the scale of the enterprise in a short time and also decentralize the management risk of the enterprise. If the real estate enterprise can obtain foreign direct investment, it also can improve the technical level and management level in middle and western area.Finally, this article gives some suggestions on the optimization of asset liability structure and equity structure of China’s real estate enterprise. On the optimization of asset liability structure, the suggestions are improving the listing system of real estate enterprise, speeding up the development of enterprise bond market and encouraging the real estate enterprise to carry out innovative financing channels, so as to make the real estate enterprises break through the external financing difficulties. In adjustment of ownership structure, state-owned shares should be gradually withdrawn from the real estate enterprises. It also needs to encourage foreign capital to invest the real estate enterprises. At last, it needs to establish perfect insider shareholding system and encourage the combination of real estate capital and financial capital.