Further Evidence on the Capital Structure of REITs
Posted: 23 Aug 2010 Last revised: 30 Sep 2010
Date Written: August 20, 2010
This study examines the determinants of REIT capital structure decisions from 1990-2008. Using a broad sample of 2,409 firm-year observations, we find that asset tangibility is positively related to leverage, while profitability and market-to-book ratios are negatively related. Additional evidence suggests firm debt capacity varies systematically with the unique operating and financing mechanisms employed by REITs. These results are robust across both aggregate firm debt levels and marginal security issuance decisions. Finally, our results provide further insight into competing capital structure theories, generally supporting empirical predictions derived from the market timing and trade-off theories, while failing to support pecking order theory predictions.
Keywords: REITs, Capital Structure, Debt Capacity
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