Property Segment and REIT Capital Structure
University of Connecticut - School of Business
University of Amsterdam - Finance Group; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)
October 6, 2011
Journal of Real Estate Finance and Economics, Vol. 43, No. 4, 2011
This paper relies on an increasing number of industry equilibrium studies linking a firm to its industry peers to help explain the observed REIT capital structure variation within property segments beyond what is possible with the traditional partial equilibrium trade-off and pecking order theories, which assume that each firm operates in isolation from other market participants and are not particularly suitable to REIT's position within its property segment. Consistent with the competitive equilibrium model of Maksimovic and Zechner (1991), we find that a REIT's volatility of operating performance relative to the median volatility of operating performance of its segment peers is an important determinant of its leverage ratio. We also find that a REIT's leverage ratio depends on the median leverage ratio in its segment. Leverage is also related to a REIT's status as an incumbent and its role as a leader in the property segment. Leverage is also related to a REIT's status an an incumbent and its role as a leader in the property segment.
Keywords: Property segment, REIT competition, Capital structure
JEL Classification: G32Accepted Paper Series
Date posted: October 8, 2011
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo4 in 0.704 seconds