CORPORATE GROWTH STRATEGY AND SHARE PRICE PERFORMANCE OF SINGAPORE PROPERTY COMPANIES

Abstract

This study attempts to compare the actual and sustainable growth rates of 16 publicly-listed Singapore property companies for the period 1986 - 1995, and the effect of their growth rates on their returns to shareholders. Based on the published annual reports, this research hopes to evaluate the growth strategy, financial management and share price performance of the property companies. Property companies in general had high leverage and low liquidity. This is shown in their high growth in their assets, shareholders' equity. The actual growth of all property companies were generally higher than their sustainable growth rates. This is especially so during 1993 — 1995. It was found that the strategies taken by the companies were external financing rather than internal financing. Results also showed rhat the growth rates had no impact on the companies' share value. Two case studies were done on City Development Limited and DBS Land. It was found that both companies preferred the use of debt and equity financing to sustain their high growth, rather than reducing dividend payout. Only difference to note is there is an influence of their growth on their share value. The conclusion reached in this study is that Singapore listed property companies had used strategies such as increasing debt and equity financing to sustain their high growth. Without the appropriate actions taken, high growth may result in distress and takeover. This signified the importance of growth management in property companies.