CAPITALAND LIMITED’S ASSET LIGHT GROWTH STRATEGY : A CLINICAL STUDY

Abstract

This clinical study examines CapitaLand’s asset light growth strategy through a three pronged approach; qualitatively, quantitatively and from the market performances of CapitaLand, its listed entities and its competitors. Existing literatures from the strategy, finance and accounting are drawn upon to provide justifications for the use of the strategy. This study finds strong support for this strategy from a strategic point of view, and through the analysis of the financials of CapitaLand. Thus, this strategy seems to be beneficial to CapitaLand. However, the market performances of CapitaLand and its listed entities suggest that the equity holders of these companies do not benefit from such a strategy. This study draws on a combination of anecdotal and empirical evidence to show that CapitaLand’s top management is the major beneficiaries of such a strategy. This finding suggest that, despite efforts to reduce the agency costs by introducing pay-for-performance compensation plans, it suggests the contrary, whereby agency costs may have risen instead, as managers institute strategies that may not benefit shareholders in the long run. This clinical study serves to alert the investing public of the dangers of investing in companies that utilize such strategies. It also highlights to the investing public the need to understand a company’s strategy, structure, and related entities, instead of merely relying on a company’s financial statements.