Impact of capital structure on financial performance of real estate Literature review - 1

Impact of capital structure on financial performance of real estate firms listed in Chinese stock exchange - Literature review Example In early 1990s, the Chinese state council took the initiative of developing two national stock exchanges. According to CSRC (2008, p.3), the two fundamental national stock exchanges included Shenzhen Stock Exchange (SZSE) in 1991 and in 1990, the Shanghai Stock Exchange (SHSE). Development of the two significant national stock exchanges as aforementioned led to establishment of many listed companies, increased total market capitalization and trading volume. It is through these reforms that the department of housing and real estate in the ministry of construction introduced a new structure of private ownership of property. Li, Luo and Ao (2011, p. 294) demonstrates how the private ownership structure in the real estate industry has developed over the years to become the pivotal industry of the national economy. A study carried out with the intention of determining the relationship between real estate investment and the GDP growth in China showed that there is a stable long run relationship between the two. However, the empirical study further stated that the potential threshold effect of real estate investment on its contribution to GDP growth depends on per capita GDP thus different regions sampled for the study in China gave different impact. The contribution is high when per capita GDP is greater than $1000 while the converse is true. Real estate business is considered a major contributor to economic growth because the industry has large multiplier effects and is believed to be associated with many external social and social economic benefits. According to Country Intelligence report, 2014, p. 14 the real estate industry affects the economic development through its impact on employment, labor productivity, savings and total investment. Capital structure affects the market value of the firm, the cost of capital, the integral operative performance and the corporate