Finance, Investment and Investment Performance: Evidence from the REIT Sector |
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| Authors: | Steven H. Ott Timothy J. Riddiough Ha-Chin Yi |
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| Affiliation: | Belk College of Business Administration, University of North Carolina at Charlotte, Charlotte, NC 28223-0001 or .; Graduate School of Business, University of Wisconsin-Madison, Madison, WI 53706 or .; McCoy College of Business Administration, Texas State University-San Marcos, San Marcos, TX 78666 or . |
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| Abstract: | We examine financing, investment and investment performance in the equity REIT sector over the 1981–1999 time period. Analysis reveals significant differences between the old-REIT (1981–1992) and new-REIT (1993–1999) eras. The sector experienced rapid growth in the new-REIT era, primarily from firm-level investment as opposed to new entry. Firm-level investment was largely financed by equity and long-term debt, with little reliance on retained earnings. Financing policy stabilized in the new-REIT era, and capital structures became more complex. We find that REITs provided returns over and above their cost of capital, where most of the value-added investment occurred in the new-REIT era by newer firms. Finally, we present novel evidence on IPO activity and new firm investment–investment performance relations that is consistent with Tobin's q theory of investment. |
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