The determinants of capital structure Evidence on UK property companies

Employing the panel data methodology, we examine the capital structure determinants of 83 property companies quoted in the UK. The empirical test reveals how the debt‐equity structure of the companies is influenced by the various firm‐specific attributes and macro‐economic factors. In particular, the evidence shows that asset structure, business orientation, and the level of involvement in property development are significant determinants of the corporate debt policy of property companies. Financial distress consideration also has a significant influence. In addition, the empirical evidence shows that corporate property managers take into consideration the prevailing market sentiment and borrowing costs when making the debt‐equity choice. Corporate performance and tax burden, however, do not appear to have any significant effect on the capital structure decision of property companies.