REIT Dividend Policies and Dividend Announcement Effects During the 2008-2009 Liquidity Crisis
Real Estate Economics, September 2012
Posted: 26 Apr 2011
Date Written: April 25, 2011
REIT dividend policies and dividend announcement effects during the 2008-2009 liquidity crisis are examined. Multinomial logit results indicate that REITs with higher market leverage or lower market-to-book ratios are more likely to cut dividends, suspend dividends, or pay elective stock dividends. These results imply that mitigating going-concern risk is an important motive for REITs adjusting dividend policies during the crisis and support dividend catering theory where investor demand for dividends impacts corporate dividend policies. Moreover, REITs that cut or suspend dividends experience positive cumulative abnormal returns during the post dividend announcement period, controlling for the potential influence from simultaneous FFO announcements. The positive market response over the post announcement period supports the notion that dividend decisions convey information to investors (Brav et al., 2005) and is also consistent with the broad catering theory of dividend policy.
Keywords: REIT Dividend Policies and Dividend Announcement Effects
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