REIT Leverage and Return Performance: Keep Your Eye on the Target

49 Pages Posted: 27 Nov 2017

See all articles by Emanuela Giacomini

Emanuela Giacomini

Department of Economics and Law

David C. Ling

University of Florida - Warrington College of Business Administration

Andy Naranjo

University of Florida

Multiple version iconThere are 3 versions of this paper

Date Written: Winter 2017

Abstract

This article examines U.S. REIT leverage decisions and their effects on risk and return. We find that the speed at which REITs close the gap between current debt levels and target leverage levels is 17% annually. REITs that are highly levered relative to the average REIT tend to underperform REITs with less debt in their capital structure. However, REITs that are highly levered relative to their target leverage tend to perform better on a risk‐adjusted basis than under‐levered REITs. Taken together, our results show that REIT leverage has significant return performance effects conditional on deviations from target leverage.

Suggested Citation

Giacomini, Emanuela and Ling, David Curtis and Naranjo, Andy, REIT Leverage and Return Performance: Keep Your Eye on the Target (Winter 2017). Real Estate Economics, Vol. 45, Issue 4, pp. 930-978, 2017, Available at SSRN: https://ssrn.com/abstract=3076669 or http://dx.doi.org/10.1111/1540-6229.12179

Emanuela Giacomini (Contact Author)

Department of Economics and Law ( email )

Via Crescimbeni 14
Macerata, MC 62014
Italy

David Curtis Ling

University of Florida - Warrington College of Business Administration ( email )

P.O. Box 117168
Gainesville, FL 32611
United States
352-392-9307 (Phone)
352-392-0301 (Fax)

Andy Naranjo

University of Florida ( email )

Gainesville, FL
United States

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