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A financial analysis measuring the competitiveness of large housebuilders vs medium-sized housebuilders in the UK

Khan, K; (2008) A financial analysis measuring the competitiveness of large housebuilders vs medium-sized housebuilders in the UK. Doctoral thesis , UCL (University College London). Green open access

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Abstract

Prior research on the competitiveness of housebuilders suggests that larger firms tend to be more competitive due to reasons of economies of scale and scope, when compared to medium-sized firms. This effect is offset against medium-sized housebuilders which have shown in the past signs of higher profitability whilst remaining prone to failure during business cycle downturns. The report attempts to look at the effect of different financial structures retained by the two classes of housebuilders in 2007, and whether these vary a great amount with changes in size. Upon analysis, the results in general indicated the following for housebuilders: 1) As housebuilder size reduces, the general pattern points towards increased gearing, 2) Increased gearing leads to a smaller interest cover, 3) Higher gearing results in lower net profitability, 4) Medium firms have lower estimated cost of debt, 5) Increased gearing leads to housebuilders being able to pay lower corporate taxes, 6) Larger firms are able to maintain a greater margin of liquidity when compared to the medium-sized firms when measured using the current ratio. On the other hand market-related analysis showed that: 1) Increasingly smaller firms tend to have higher beta values, 2) Beta calculations and market share price fluctuations are somewhat correlated, 3) The relationship between gearing and beta is contrasting when the gearing ratio is calculated in different ways, 4) Medium- sized firms have higher price-earnings ratios, 5) And lastly, the valuation ratios measuring the market-value of a firm against the financial-statement-based-total- equity show higher values for medium-sized firms in 2007. The results therefore demonstrate that firms have different capital structures in place in order to fulfil different organisational goals. This does however leave them more or less secure in different economic environments as well as affecting their profitability during business cycles.

Type: Thesis (Doctoral)
Title: A financial analysis measuring the competitiveness of large housebuilders vs medium-sized housebuilders in the UK
Open access status: An open access version is available from UCL Discovery
Language: English
Additional information: Thesis digitised by ProQuest.
UCL classification:
URI: https://discovery.ucl.ac.uk/id/eprint/1566904
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