Scandinavian Working Papers in Economics
Working Paper Series,
Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance
No 23/3: Decomposing Industry Leverage: the Special Cases of Real Estate Investment Trusts and Technology & Hardware Companies
Wolfgang Breuer (), Linh.D Nguyen () and Bertram Steininger ()
Additional contact information
Wolfgang Breuer: RWTH Aachen University, Postal: RWTH Aachen University, Department of Finance, Templergraben 64, 52056 Aachen, Germany,
Linh.D Nguyen: Banking University of Ho Chi Minh City, Postal: Banking University of Ho Chi Minh City, Department of Finance, 36 Tôn Thất Đạm, District 1, Ho Chi Minh City, Vietnam,
Bertram Steininger: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Teknikringen 10B, 100 44 Stockholm, Sweden
Abstract: Different industries exhibit significantly different leverage – companies in the REIT and technology/hardware sectors are extreme examples. The leverage ratio is twice as high with 50% for REITs as for non-real estate firms with around 25% in the U.S.; whereas the technology/hardware sector has the lowest ratio with around 17%. We theoretically and em-pirically analyse their differences. By decomposing the difference into three channels, we find that the industry-specific channel explains around 67% for REITs and 68% for technology/hard¬ware firms; the value-based channel is mostly responsible for the remaining part. When taking non-linear influences of extreme values into account, the relevance of the industry-specific channel is considerably reduced.
Keywords: capital structure; leverage ratio; real estate investment trust (REIT); technology; hardware; software; and equipment firms; coefficient-based difference; value-based difference; intercept-based difference decomposition model
Language: English
114 pages, April 21, 2023
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