An Analysis of the Marginal Effect of Construction Company Debts on Profitability : using Panel Threshold Regression Model Approach

건설기업의 부채 활용이 수익성에 미치는 한계효과 분석 - 패널문턱모형을 중심으로 -

This study aims to analyze the marginal effects that construction firm's debts have on profitability, and to exhibit implications that may come with such faulty business plans. This study, unlike preceding researches that analyze relationships between profitability and debt of firms from a linear point of view, employs Hansen(1999)'s Panel Threshold Regression Model, which is capable of deciphering even nonlinear relationships. Sample firms for analysis include 34 construction firms that submitted financial statements on a continual basis from year 2000 through 2012 during the period of analysis among marketable securities and firms listed in the KOSPI. As for analysis materials, this study utilizes organized balancing accounts of December for 13 years corresponding to the ratio of equity capital and debt, profitability, growth, liquidity, firm size, tangibility and efficiency index employed in the Panel Threshold Regression Model. The results of this analysis on the marginal effect between construction firms' profitability and debt, through the organization of data from the Panel Threshold Regression Model targeting sample firms, show that profitability declined 3 times greater as compared to existing levels at the 223% of debt ratio. The aforementioned analysis result means that a negative influence due to increase in debt may not appear uniformly at all levels. As observed in the data of the studies, it is imperative that companies not exceed the certain level of debt which will cause an unmanageable financial situation, leading to their expedited and often unexpected downfall.