Information Asymmetry and Organizational Structure: Evidence from REITs

56 Pages Posted: 16 Nov 2011 Last revised: 22 Feb 2017

See all articles by Yongheng Deng

Yongheng Deng

Wisconsin School of Business, University of Wisconsin-Madison

Maggie Rong Hu

Chinese University of Hong Kong

Anand Srinivasan

CAFRAL, Reserve Bank of India; National University of Singapore - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: August 31, 2015

Abstract

We test for differences in information asymmetry across two organizational forms (external and internal) 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 lower loan rates and lower likelihood of collateral requirement. Further, loans to external REITs have syndicates that are larger in size and the lead lender retains a smaller portion of the loan reflecting lower information asymmetry.

Keywords: external advisor, Real Estate Investment Trust, organizational structure, loan contract terms, information opacity, certification effect

JEL Classification: G20, L85, L00, L22

Suggested Citation

Deng, Yongheng and Hu, Maggie Rong and Srinivasan, Anand, Information Asymmetry and Organizational Structure: Evidence from REITs (August 31, 2015). Journal of Real Estate Finance and Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1959719 or http://dx.doi.org/10.2139/ssrn.1959719

Yongheng Deng (Contact Author)

Wisconsin School of Business, University of Wisconsin-Madison ( email )

4110 Grainger Hall
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Madison, WI 53706
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HOME PAGE: http://https://bus.wisc.edu/faculty/yongheng-deng

Maggie Rong Hu

Chinese University of Hong Kong ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Hong Kong, N.T.
Hong Kong

Anand Srinivasan

CAFRAL, Reserve Bank of India ( email )

C-8, 8th Floor, Reserve Bank of India
Bandra-Kurla Complex, Bandra (East)
Mumbai, Maharashtra 400051
India

National University of Singapore - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

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