Date of Award
Dr. KWOK Yee-ling, Helen
The purpose of this report is to find out the relationship between Hong Kong construction industry and the market condition of Hong Kong in the past 5 years (1993-97).
Prior research showed that construction industry is an important contributor to the economic development of Singapore by helping to establish the infrastructure required for sustaining socioeconomic development (Ofori 1988). Although a number of researches were on the prediction of solvency, none was related to the construction industry in Hong Kong. Recently, Hong Kong has been facing economy difficulty, concern is aroused in the healthiness of Hong Kong business. Construction industry, being an important industry, deserves to study.
To determine the relationship between market condition and the industry, we use the Capital Asset Pricing Model (CAPM). The results of CAPM showed that the financial performance of construction companies follow the movement of the market. We determine the change of financial position of Hong Kong construction companies by using the industrial average of the construction sector in Hong Kong and applying financial statement analysis techniques. We found from the financial statement analysis that most construction companies were not profitable and most of them had high gearing ratios.
Questionnaires are sent to 22 listed construction companies to identify the possible factors that affect the their performance. According to the view of these construction companies, their performance was much affected by the economic condition.
These results are consistent in the way that the construction companies are not profitable during the periods. Long Debtor’s Day and high gearing position are norms in construction industry. Most sample companies in our study follow these norms. The result shows that most sample companies follow the market to grow but the growth rate is not as rapid as the market. We recommend that the construction companies should better control their debt and expenses with great care so as to improve profitability and financial leverage. Through value management to achieve an effective management of change.
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Tse, S. K. A. , & Hui, M. Y. M. (1999). An analysis of the change in financial position of the construction industry in Hong Kong (UG dissertation, Lingnan University, Hong Kong). Retrieved from https://commons.ln.edu.hk/acct_fyp/5