Do Investor Demand and Market Timing Affect Convertible Debt Issuance Decisions by REITs?

Posted: 31 Oct 2014

See all articles by Masaki Mori

Masaki Mori

National University of Singapore

Joseph T. L. Ooi

National University of Singapore (NUS) - Department of Real Estate

Woei Chyuan Wong

Universiti Utara Malaysia

Date Written: October 29, 2014

Abstract

The unique regulatory environment of REITs casts doubt on the traditional theoretical process by which REIT managers base their convertible debt issuance decisions on issuer condition and prospects. Anecdotal evidence shows that REITs may have catered to demand by investors, including a demand by convertible bond arbitrageurs when issuing convertible debt. This study examines the rationale behind convertible debt issuances by REITs, focusing on the possible impacts of investor demand and market timing. The results suggest that investor demand significantly affects convertible debt issuance decisions by REITs while certain unknown factors appear to have contributed to the sudden increase of convertible debt offerings in 2006 and 2007. REITs also time the market to conditions in the public debt market. The results only partially support the offered risk-shifting, risk-uncertainty, backdoor-equity, and sequential-financing hypotheses.

Keywords: REIT; convertible debt; investor demand; market timing; convertible bond arbitrage

Suggested Citation

Mori, Masaki and Ooi, Joseph T. L. and Wong, Woei Chyuan, Do Investor Demand and Market Timing Affect Convertible Debt Issuance Decisions by REITs? (October 29, 2014). Journal of Real Estate Finance and Economics, Vol. 49, No. 4, 2014, Available at SSRN: https://ssrn.com/abstract=2516352

Masaki Mori (Contact Author)

National University of Singapore ( email )

Department of Real Estate
4 Architecture Drive
Singapore, 117566
Singapore

Joseph T. L. Ooi

National University of Singapore (NUS) - Department of Real Estate ( email )

4 Architecture Drive
Singapore 117566
Singapore

Woei Chyuan Wong

Universiti Utara Malaysia ( email )

Malaysia

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