Network Connections in REIT Markets

32 Pages Posted: 31 Jan 2016

See all articles by George D. Cashman

George D. Cashman

Marquette University; Texas Tech University

Stuart Gillan

University of Georgia - Department of Finance

David Harrison

Texas Tech University

Ryan J. Whitby

Utah State University - Huntsman School of Business

Date Written: 2015

Abstract

Relationships play a central role across the spectrum of real estate transactions. Whether negotiating prices, securing funding, or acquiring permits, knowing the right people provides multiple channels to facilitate deal making. To better understand the role of relationships in real estate markets, we examine how the connectedness of REIT directors is associated with deal making, growth, and profitability. We find strong evidence that REIT connections are positively associated with both deal making and accounting based measures of profitability, however, those relations do not translate into better market returns or higher valuations. One explanation of these somewhat contradictory results is that connections also increase firm risk. Preliminary support for this conjecture is found through our examination of each firm’s implied cost of equity capital. Specifically, we find increasing connectedness is associated with a higher cost of equity capital. Thus, connections appear to offer both advantages and disadvantages to REIT managers and shareholders.

Keywords: REITs, Networks, Boards of Directors, Connections

Suggested Citation

Cashman, George D. and Gillan, Stuart L. and Harrison, David and Whitby, Ryan J., Network Connections in REIT Markets (2015). Available at SSRN: https://ssrn.com/abstract=2724873 or http://dx.doi.org/10.2139/ssrn.2724873

George D. Cashman (Contact Author)

Marquette University ( email )

College of Business Administration
P.O. Box 1881
Milwaukee, WI 53201-1881
United States
4142881448 (Phone)

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

Stuart L. Gillan

University of Georgia - Department of Finance ( email )

Terry College of Business
Athens, GA 30602-6253
United States

David Harrison

Texas Tech University ( email )

2500 Broadway
Lubbock, TX 79409
United States

Ryan J. Whitby

Utah State University - Huntsman School of Business ( email )

3500 Old Main Hill
Logan, UT 84322-3500
United States
435.797.9495 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
61
Abstract Views
449
rank
370,508
PlumX Metrics