| Title |
Influence of Overseas Construction Business on Construction Companies’ Financial Stability |
| Authors |
Cho, Kyu-Su ; Lee, Sang-Hyo ; Kim, Jae-Jun |
| DOI |
http://dx.doi.org/10.6106/KJCEM.2013.14.1.043 |
| Keywords |
Financial Stability ; Overseas Construction Business ; Vector Error Correction Model |
| Abstract |
The changes in business structure of domestic construction companies suggest that there is a close relationship between the volume of overseas project and a company’s financial condition. Based on this assumption, this study conducts an empirical analysis on a relationship between overseas project and financial stability of a construction company. The ratio of liquidity and liability was used as liquidity index and stability index respectively. The analysis was based on quarterly time-series data between 2000 and 2010. Two models were constructed for the analysis: Model 1 was based on the liquidity ratio and the amount of domestic and overseas construction project; Model 2 was based on the debt ratio and the amount of domestic and overseas construction project. The analysis results showed that the increasing amount of overseas project facilitated short-term financing with greater liquidity, and yet it was not very effective in lowering the debt ratio. This suggests that the dramatic increase in overseas construction project, which is observed recently, is not entirely an optimistic sign. |