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Dynamic operating efficiency and its determining factors of listed real‐estate companies in China: A hierarchical slack‐based DEA‐OLS approach
Author(s) -
Atta Mills Ebenezer Fiifi Emire,
Baafi Mavis Agyapomah,
Liu Fangbiao,
Zeng Kailin
Publication year - 2021
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.1965
Subject(s) - real estate , data envelopment analysis , economics , profitability index , earnings before interest and taxes , econometrics , capitalization rate , ordinary least squares , efficient frontier , financial economics , real estate investment trust , finance , portfolio , mathematics , statistics
This study uses a dynamic slacks‐based measure (SBM) model in a data envelopment analysis (DEA) framework with surplus reserve and accounts receivable as desirable and undesirable indicators respectively, based on inter‐connectivity between consecutive periods to estimate the operating efficiency of 110 listed Chinese real‐estate companies in the first step analysis. The results show that 35 listed real‐estate companies in China operated on the efficient frontier by maintaining sustainable growth throughout the entire period. The analysis presents the projection of indicators to suggest a feasible solution to improve the inefficient terms. At the second step analysis, using ordinary least square (OLS) estimation, authors find a curve‐linear relationship between real‐estate company size and efficiency to suggest that operating efficiency increases as size also increases due to economies of scale but only up to an optimum point. Profitability and higher education are also identified as the other significant determinants of operating efficiency. The findings of this research present evidence that average efficiency scores vary over time and generally comove with China's economic growth rate and the average stock returns in the real‐estate sector. By providing a new framework for evaluating input, output and carry‐over indicators of real‐estate companies, the results of this study equip real‐estate companies to have an accurate perspective of their operating position and simultaneously provide investors with an avenue to evaluate real‐estate companies' development before any form of investment.