61 NTU Management Review Vol. 31 No. 1 Apr. 2021 City. We also examine the particular factors that affect a company’s price-cutting when promoting new construction projects. 2. Design/Approach This study first explores the lead-lag and causal relationships between the discount rate and the sales rate, and then investigates product characteristics (i.e., characteristics of new construction projects) and other related factors that affect the discount rate. By focusing on the sales processes of construction companies and sales agencies when promoting new construction projects, this study investigates the relationships between the discount rate and the sales rate from both macro and micro perspectives. For the macro perspective, we employ the vector error correction model (VECM) to determine whether cointegration exists between the discount rate and the sales rate as well as to evaluate the lead-lag and causal relationships between these two rates. For the micro perspective, we consider the discount rate as the dependent variable in a multiple regression model to identify the product characteristics that influence the discount rate in the sales processes of new construction projects. Finally, we compare the results with practical cases. 3. Findings The empirical results obtained from the VECM analysis of the macro perspective reveal the lead-lag relationship between the sales rate and the discount rate. In an unfavorable real estate market, construction companies typically do not reduce the price of their new construction properties to increase the sales rate (i.e., profit-sharing perspective). Instead, they reduce price only when the cost of capital financing increases and financial risk increases (i.e., sales perspective). After establishing the temporal causal relationship between the sales rate and the discount rate as well as construction companies’ motivations to cut prices, this study uses the discount rate as the dependent variable in the analysis of factors affecting construction companies’ price reduction practices. The empirical analysis based on micro perspective reveals a negative relationship between the discount rate and the sales rate, with the low sales rate being associated with the high discount rate. We also confirmed that a lead-lag relationship between the discount rate and the sales rate exists. Specifically, the discount rate decreases by 0.022% for each 1% increase in the sales rate. The significant influence of the sales rate on the degree of the discount rate supports the sales perspective.
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