Real Estate Mergers: Corporate Control & Shareholder Wealth
Kiplan S. Womack
Pepperdine University, Graziadio School of Business & Management
May 29, 2010
Journal of Real Estate Finance and Economics, Forthcoming
This study contributes new evidence to distinguish why mergers occur in the real estate industry by quantifying the combined firm return for nearly three decades of real estate mergers. As a measure of the overall change in shareholder wealth created by a merger, the combined firm return plays a key role in differentiating competing merger theories and is quantified for the real estate industry for the first time. Findings from this study are consistent with the notion that real estate mergers occur because firms with superior management acquire other firms that possess unexploited opportunities to cut costs and increase earnings (the inefficient management hypothesis). Furthermore, the results indicate that real estate mergers generally create wealth, as shareholders at best realize modest gains and at worst break even.
Number of Pages in PDF File: 38
Keywords: merger, acquisitions, Real Estate Investment Trusts, REITs
JEL Classification: G34, G14, L85Accepted Paper Series
Date posted: July 21, 2010
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