The Information Content of the 1999 Announcement of Funds from Operation Changes for Real Estate Investment Trusts
16 Pages Posted: 13 Dec 2006
This study examines the market response to the 1999 announcement of a change in accounting for Funds from Operations (FFO) for Real Estate Investment Trusts (REITs). This change provides an increase in transparency in the accounting statements of REITs regarding the calculation of FFO. An analysis of this announcement finds that shareholder wealth increases but the significance of that increase is questionable. Additionally, an analysis of the adverse selection component of the bid-ask spread finds weak evidence to support the conjecture that the amount of information asymmetry in REIT prices declines after the announcement of the FFO accounting change.
Keywords: Funds from Operations, FFO, REITs, real estate investment trust, bid-ask spread
JEL Classification: M41, M49, L85, L11, L14, K20, K23, G34, G38
Suggested Citation: Suggested Citation