An empirical investigation of agency relationships and capital structure of property management firms in the UK
| Pages | 27-34 |
| Published date | 01 March 1999 |
| Date | 01 March 1999 |
| DOI | https://doi.org/10.1108/14635789910252792 |
| Author | John Theis,Michael Casey |
| Subject Matter | Property management & built environment |
Academic papers:
Investigation
of agency
27
ACADEMIC PAPERS
An empirical investigation of
agency relationships and
capital structure of property
management firms in the UK
John Theis
Mesa State College, Grand Junction, Colorado, USA, and
Michael Casey
Henderson State University, Arkadelphia, Arizona, USA
Keywords Debts, Property management, United Kingdom
Abstract This study examines the relationship between various agency factors and debt of
property management firms in the UK. Findings indicate that debt is significantly inversely related
to percentage of shares closely held, dividend yield and price-to-book ratio. Size, measured by sales
volume, appears to be insignificant in determining debt level.
I. Introduction
Shareholder wealth maximization dictates that firms choose the optimal mix of
debt and equity. Previous researchers, including Bradley et al. (1984) and Bowen
et al. (1982), find that firms in a given industry develop similar capital
structures. Exogenous variables appear to impact firms in the same industry in
similar ways, thus leading to the existence of an industry capital structure. A
better understanding of the factors impacting capital structure in specific
industries should help management decision making regarding capital
structure decisions.
Since Modigliani and Miller’s (1963) seminal article related to corporate
taxation and the benefits of debt, a number of researchers have focused on tax
rationale for debt levels. This paper attempts to eliminate the impact of
differential tax laws on capital structure by focusing on a given industry in one
selected country. Property management firms in the UK provide sufficient
sample size, thus eliminating the need to isolate specific country differences.
Firms engaged in real estate related activities continue to be under-
researched with respect to capital structure determinants. As such, additional
investigation is necessary to develop an understanding of the factors important
in determining the most appropriate capital structure for property management
firms in the UK. Harris and Raviv (1991) identify four categories of capital
structure determinants, one of which is selecting the level of debt that reduces
Journal of Property Investment &
Finance, Vol. 17 No. 1, 1999,
pp. 27-34. © MCBUniversity Press,
1463-578X
Received 16 March 1998
Revised 4 August 1998
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