Information Asymmetry and Organizational Structure: Evidence from Real Estate Investment Trusts
National University of Singapore (NUS) - Institute of Real Estate Studies; National University of Singapore
Maggie Rong Hu
National University of Singapore - Department of Finance; National University of Singapore (NUS) - Centre for Asset Management Research & Investments (CAMRI)
National University of Singapore - Department of Finance
December 1, 2012
We test for differences in information asymmetry across two organizational forms in the REIT industry. We find significant differences with external REITs being significantly more transparent relative to internal REITs, and these differences are reflected in the loan contract terms and loan syndicate structure of loans made to these two types of REITs. We find that the relatively more transparent externally advised REITs are offered more favourable loan contracts in terms of discounts in loan rate charged, less stringent collateral requirement and covenants, and that loans to external REITs have syndicates that are larger in size and the lead lender retains a smaller portion of the loan.
Number of Pages in PDF File: 56
Keywords: external advisor, Real Estate Investment Trust, organizational structure, loan contract terms, information opacity, certification effect
JEL Classification: G20, L85, L00, L22working papers series
Date posted: November 16, 2011 ; Last revised: December 3, 2012
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