Key factors influencing capital structure decision and its speed of adjustment of Thai listed real estate companies

This paper investigates the significant factors influencing capital structure decision of the listed real estate companies and the speed of adjustment towards their target level. The study used homogeneous panel of 39 Thai companies in real estate industry listed in the Stock Exchange of Thailand (SET) during the period 2002 to 2009. The analysis employs multiple linear panel regression models in examining factors influencing capital structure decision, as well as, dynamic panel regression model using one-step and two-step Arellano and Bond GMM estimation methods in determining the speed of adjustment towards target capital structure. The findings indicate that firm leverage is positively related to median industry leverage. Furthermore, firm size and growth opportunities have positive relationship with firm leverage, whereas profitability and leverage are negatively associated. Our results support pecking order theory as higher profitability firms tend to have less debt and firms with higher growth opportunities tend to have greater leverage. Additionally, the study also discovers that real estate companies partially adjust their capital structure towards the target level capital structure only at the rate of 63 percent