Market Value of REIT Liquidity

Posted: 23 Aug 2012

See all articles by Matthew D. Hill

Matthew D. Hill

Arkansas State University

G. W. Kelly

University of Southern Mississippi; Mississippi State University - Department of Finance and Economics

William G. Hardin

Florida International University (FIU) - College of Business Administration

Multiple version iconThere are 2 versions of this paper

Date Written: August 23, 2012

Abstract

We examine the relation between firm value and liquidity among REITs. Results show shareholders benefit from both cash and unused credit line capacity. The market values an additional dollar of cash at a premium and, as theory predicts, unused credit lines are significantly less valued than cash. Evidence suggests an increase in the market value of liquidity during the recent financial crisis. We also find that financial characteristics quantifying financial constraint influence the value of REIT financial flexibility. Most notably, the value of cash decreases with remaining credit line capacity. Although prior studies argue that cash and credit lines are substitutes, this is one of the first tests of whether the market prices this substitutability.

Keywords: REITs, Cash, Credit lines, Liquidity, Firm value

Suggested Citation

Hill, Matthew D. and Kelly, Gary Wayne and Hardin, William G., Market Value of REIT Liquidity (August 23, 2012). Journal of Real Estate Finance and Economics, Vol. 45, No. 2, 2012, Available at SSRN: https://ssrn.com/abstract=2135056

Matthew D. Hill (Contact Author)

Arkansas State University ( email )

2713 Pawnee
P.O. Box 1750
Jonesboro, AR 72467-115
United States

Gary Wayne Kelly

University of Southern Mississippi ( email )

118 College Drive
#5076
Hattiesburg, MS 39406
United States
601 266 4959 (Phone)
601 266 6110 (Fax)

Mississippi State University - Department of Finance and Economics ( email )

Mississippi State, MS 39762
United States

William G. Hardin

Florida International University (FIU) - College of Business Administration ( email )

Miami, FL 33199
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
447
PlumX Metrics