Abstract
The aim of this study is the determination, from an empirical perspective, of the accounting and financial features which could condition financial profitability of real estate companies, to identify the performances that guarantee its permanency in the current marketplace, characterized by the world economic crisis, specially in Spain, whose housing sector represents an important contributor to the economic growth. Although at a theoretical level the DuPont Model establishes the relationships between a group of accounting ratios and financial profitability. This paper uses a sample of 5,484 Spanish real estate companies to quantify these relationships and to extract the most relevant ones and to obtain the patterns of the most profitable companies. We use ROE to measure profitability and we analyze various independent variables about solvency, liquidity, activity, turnover, financial equilibrium and investment structure. The main contribution is of methodological nature, as we have applied statistics tools that do not require initial hypotheses on the distribution of the variables, by using a data mining technique of classification and regression tree based on rule induction algorithms known as CHAID. The study provides quantitatively success profiles by means of a set of rules describing the patterns of the most profitable companies.
Highlights
In the current marketplace, which is characterized by the financial crisis in the developed world, the consequences in Spain increased due to the crisis in the housing sector that had been an important contributor to Spain’s economic growth
A modest recovery will only begin during the second half of 2010, there is a possibility that this will be delayed. This economic contraction has an important influence in the housing sector, illustrated for example with the last information published by the Bank of Spain that points out that the real estate assets of Spanish banks and saving banks were rising, at the end of March 2009, up to 20.541 million Euros, 2% more than the previous month and 10% more than one year before
The cost of debt per unit of sales was much higher for the real estate sector (4.62% vs. 1.58%), even taking into account that debt ratio was similar in both groups
Summary
In the current marketplace, which is characterized by the financial crisis in the developed world, the consequences in Spain increased due to the crisis in the housing sector that had been an important contributor to Spain’s economic growth. By means of the Clementine (SPSS Inc.) software, the CHAID rule induction algorithm (Chi-squared Automatic Interaction Detector) was applied, a highly efficient statistical technique for segmentation, or tree growing that derives a tree of rules that attempts to describe distinct segments within the data in relation to the output variable (ROE). This allowed us to classify companies according to the different values of the accounting ratios and their profitability. It can be done through various machine learning algorithms for building decision trees or decision rules, in particular by the CHAID algorithm, which we apply
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
