Do REIT Repurchases Signal Value Changes in Rivals? An Analysis of the Stock Price Reaction of Non-Repurchasing REITs

Abstract

We examine REITs at the announcement of plans for open market repurchases and determine the impact of these announcements on competing REITs. Consistent with prior research, we find evidence of significant positive returns to the repurchasing firms, on average, at announcement. We do not find evidence of a significant reaction for rival REITs. When we divide the sample based on sign of the announcement day returns to the repurchasing REITs, we find the impact for rivals differs. When there is a positive announcement effect for the repurchasing REIT, rivals do not react. When there is a negative announcement effect for the repurchasing REIT, rivals also have significant negative returns.

Keywords: REIT, Open Market Repurchase, Information Asymmetry