Changes in REIT Structure and Stock Performance: Evidence from the Monday Stock Anomaly

It is well documented that REITs in the 1990s experienced significant changes in their structure and attracted greater institutional participation. This article finds that REIT stocks with higher institutional holdings perform better on Monday than REITs with lower institutional holdings during the 1990s, but not in the 1980s. Furthermore, REITs that went public in the 1990s are the ones associated with the shift in the Monday return pattern. Our study supports the claim that the change in REIT structure and the increase in institutional participation in the REIT market in the 1990s make REIT stocks behave more like other equities in the stock market.     

The Role of Managerial Stock Option Programs in Governance: Evidence from REIT Stock Repurchases

This article examines the role of stock option programs and executive holdings of stock options in real estate investment trust (REIT) governance. We study the issue by analyzing how the market reaction to a stock repurchase announcement varies as a function of the individual REIT's governance structure. In particular, we examine how executive and employee stock option holdings influence the market reaction to a firm's announcement of a stock repurchase. Using a sample of REIT repurchase announcements, we find that the market reacts more favorably to announcements by firms where executives have larger option holdings and the chief executive officer is not entrenched. Our results with respect to the roles of stock option holdings of executives and nonexecutives differ from those reported for a cross-section of non-REIT firms. While we find evidence supporting the importance of executive stock options in aligning the incentives of management and reinforcing the positive signaling associated with a repurchase announcement, we find little evidence that the market views REIT repurchases as being used primarily to fund option exercise. We attribute these findings to greater dependence by REIT investors on internal governance mechanisms (such as stock option programs) as a result of regulatory restrictions that limit external monitoring such as hostile takeovers.     

Wealth Effects of Diversification and Financial Deal Structuring: Evidence from REIT Property Portfolio Acquisitions

This study examines the strategic characteristics and shareholder wealth effects of a popular vehicle for Real Estate Investment Trust growth in the 1990s: the acquisition of a portfolio of properties from a single seller. We examine a sample of 209 REIT portfolio acquisitions during 1995-2001. We observe a wide variety of financing strategies and find an array of different categories of sellers. Contrary to results reported in real estate transactions of this sort in the past, we find that announcement-period shareholder returns are significantly positive in the aggregate. We present evidence that excess returns to acquirers result from (1) wealth benefits received when companies reconfirm their geographical focus in the acquisition, (2) positive information conveyed by the use of project-specific private debt and (3) a positive signal sent to the market when transactions are financed by stock privately placed with financial institutions.     

Financial Flexibility and Investment: Evidence from REIT At‐the‐Market (ATM) Equity Offerings

This article examines changes in real estate investment around the establishment of at‐the‐market (ATM) equity programs by equity REITs. We document a significant increase in the rate of investment following an ATM program announcement and its subsequent use. However, we find that ATM access has a differential impact on the investment activity of REITs facing more significant financial constraints. We also provide further evidence that REITs with ATM programs generate positive long‐run returns in excess of that of similarly timed SEOs.     

Changes in REIT Liquidity 1990–1994: Evidence from Intra-day Transactions

This study uses data on intra-day transactions to analyze whether real estate investment (REIT) liquidity as measured by the bid-ask spread changed from 1990 to 1994, a period during which the industry's market capitalization increased from $8.7 billion to $45 billion. REIT percentage spreads (spread as percentage of share price) narrowed significantly, primarily attributable to higher share prices rather than narrower dollar-value spreads. An empirical model is used to analyze the determinants of percentage spreads. Return variance and share price, not market capitalization are found to be the primary determinants of percentage spreads in both periods. This suggests that the liquidity of REIT securities is similar to that of non-REIT securities with similar prices and return variance. In addition, percentage spreads are wider for REITs trading on the NASDAQ.     

International Diversification and Performance: Evidence from Singapore

This study focuses on how international diversification affects a firm in terms of multiple performance measures (accounting-based, market-based, and intangible value creation). The study is unique as it uses segment data made available only recently, which enables the examination of both product and international diversification with performance. The period studied coincided with Singapore firms performance during the Asian Financial Crisis. In contrast to previous studies on Singapore, our results show that product diversification is negatively correlated to all measures of performance, while international market diversification is positively correlated. We attribute the difference to the time period which covers both upswings and downturns of the economy, unlike previous studies which considered only the former. Other control measures were incorporated; firm size is highly significant in explaining all measures of performance but not so for firm age, leverage, risk and industry. For top managers, we suggest that regardless of economic climate, the dominant diversification strategy is to take a focused approach to product diversification, but a broad approach to international diversification.Dr. Er and Dr. Kwok are assistant professors in the Department of Finance & Accounting, National University of Singapore (NUS). Mr Lin recently graduated with a B.B.A. honours (1st class) degree from NUS.     

Finance, Investment and Investment Performance: Evidence from the REIT Sector

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.     

Price Signaling and Return Chasing: International Evidence from Maturing REIT Markets

This article examines the liquidity of international real estate securities across 10 markets over the period 1990–2015. We apply and compare results for four different measures of liquidity, and find that while liquidity has increased consistently, wide variations still exist across markets, with the United States and Japan in the lead. Our results also suggest that the introduction of local REIT regimes did not have any pervasive effects on stock liquidity. When we study the relationship between liquidity and returns, we document new and consistent evidence for international return chasing behavior, whose pattern is a function of local market efficiency, listed real estate market maturity and stock ownership dispersion. The introduction of REIT regimes seems to weaken the importance of extra performance over and above general equity returns as investors tend to allocate funds to real estate securities within real estate rather than equity portfolios.     

Fact‐Finding Effectiveness: Evidence from New York State Fact‐Finding Effectiveness

In a collective‐bargaining environment characterized by increasing fiscal and taxpayer pressures, this article examines the continued viability of fact‐finding as a dispute‐resolution mechanism in New York State's public sector. This is an important question because fact‐finding is the final dispute‐resolution procedure for most unionized employees in New York and many other states. Whether fact‐finding effectiveness was measured by the proximity of fact‐finder recommendations to the final settlement or by outright acceptance of the fact‐finder report, regression results show that New York fact‐finding has successfully met the challenges of the intensified environmental pressures in the 1990s. No significant decline was found in its ability to move parties toward the compromise outcome. Part of the fact‐finding's continued success can be attributed to the policy shift by New York's Public Employment Relations Board (PERB) in 1991 in the role of the fact‐finder from an accommodative to a more adjudicative function. The well‐reasoned adjudicative fact‐finding report has more potential to bring public pressure to bear on the extreme positions of the parties. Mediation was better left to the professional PERB mediators. Finally, it also was found that fact‐finders who were full‐time neutrals were more effective under this more adjudicative style.     

Regulating short‐term rental housing: Evidence from New Orleans

This study examines the effects of regulations targeting Airbnb and other short‐term rental (STR) suppliers in the urban center of New Orleans. I show that although the new ordinances reduced participation in the STR market as intended, STR usage actually increased in the neighborhoods adjacent to areas the most affected by the regulations. I subsequently show that the new regulations depressed property values in the neighborhoods facing the tightest regulations by approximately 30%, implying that homeowners factor into their housing purchasing decisions the option to participate in the STR market.     

Diversification in context: a cross‐national and cross‐temporal extension

This research note examines the stability of diversification performance relationships in three countries (France, Germany and the United Kingdom), for two time periods (1982–84 and 1992–94). The aggregate findings, taking the three countries and two time periods together, support a general model favoring related‐constrained diversification. However, disaggregated analyses show sharp variations in different countries and time periods. The note concludes that although broad performance relationships can be found, these can be expressed very differently in particular contexts. We consider implications for further research. Copyright © 2003 John Wiley & Sons, Ltd.     

Robust Testing of the Utility‐based High‐technology Product Sales Forecasting Models Proposed by Decker and Gnibba‐Yukawa (2010)

Decker and Gnibba‐Yukawa (2010) propose an elegant utility‐based model for forecasting the sales of high‐technology products and suggest that the model yields forecasts that are highly accurate. However, this finding is based on forecasts for a total of only six holdout observations shared across three products. This number of observations is insufficient for reliable inferences to be drawn about the accuracy of a method and the use of such a small data set runs counter to an accepted principle of forecast evaluation. The authors’ proposed model was tested on more extensive data and sensitivity analysis applied to the results. No evidence was found that the utility‐based model could outperform a relatively simple extrapolative model despite the much greater effort involved in applying the proposed model. In addition, the utility‐based model is only applicable for forecasting sales during a narrow interval in a product's life cycle and requires several periods of historic sales data before it can be implemented. It also depends heavily on the accurate estimates of parameters that are determined outside the model (and which may depend on difficult judgments by managers) and assumes that consumers or households will only purchase the product once between the launch date and the forecast horizon. In light of this, it is argued that the utility‐based model is likely to have limited usefulness as a sales forecasting tool.     

The Effects of Non‐Expensed Employee Stock Bonus on Firm Performance: Evidence from Taiwanese High‐Tech Firms

The choice of whether to expense broad‐based stock incentives has been a highly controversial debate in both academic research and practice circles. We provide insightful findings to reconcile certain debates regarding the effectiveness of non‐expensed, broad‐based stock incentives. Using a unique longitudinal dataset from Taiwanese high‐tech firms over the 1997–2008 period, our results indicate that non‐expensed employee stock bonus incentives exerted positive effects on short‐term organizational value added creation. The dilution effects of broad‐based stock incentives in Taiwan, however, exerted a negative influence on profitability and eroded share return. The negative effects were even more severe in the following year, and overexploitation of employee stock bonus also damaged the long‐term organizational performance of Taiwanese high‐tech firms. This negative aspect of non‐expensed employee stock incentives resulted in more evidence for changing the regulatory context of broad‐based stock incentives in Taiwan.     

Asset Growth and Stock Performance: Evidence from REITs

In this article, we examine the impact of asset growth rates on the future stock performance of 308 publicly traded real estate investment trusts (REITs). We observe that fast‐growing REITs tend to underperform slow growing REITs. However, we find evidence that the growth effect is significantly less negative for REITs selling at a premium to net asset value. In addition, we observe the asset growth effect only in the subsample of REITs that engages in equity issuance over the next 12 months. The combined evidence suggests contemporaneous equity dilution, which has not been considered in previous studies, may provide an explanation for the underperformance of fast‐growing firms.     

The Determinants of Stock Option Compensation: Evidence from Finland

A new, long, and rich panel data set consisting of all Finnish publicly traded firms is used to study how firm characteristics and stock market developments influence the adoption and targeting of stock option compensation. Stock option adoption is found to be a procyclical phenomenon. Findings from firm‐level econometric analysis often corroborate those based on U.S. data, but important differences also emerge. Findings include: (i) firms with higher market value per employee are more likely to use stock option compensation; (ii) share returns from the past year affect the adoption of targeted stock options, but not broad‐based plans; (iii) our results are consistent with the hypothesis that selective and broad‐based plans arise as solutions to differing monitoring difficulties. Broad‐based schemes are observed when production is human capital‐intensive and employee performance is hard to monitor, while selective schemes are adopted when ownership is dispersed and therefore owners may have weak incentives to monitor management.     

Elective Stock Dividends and REITs: Evidence from the Financial Crisis

In response to the recent financial crisis, the U.S. Government introduced new rules which allow Real Estate Investment Trusts (REITs) to issue elective stock dividends (ESDs), i.e., noncash dividends, to satisfy their distribution requirements. The purported goal of these rules was to provide temporary relief to REITs facing cash flow problems. We investigate how the introduction of these rules affects dividend policy of REITs. Surprisingly, we document that only 17 REITs chose to issue elective stock dividends. We examine the characteristics of these REITs and find that their cash flows are similar to REITs that do not select these dividends. This suggests that cash flow problems are unlikely to be the primary determinant of the ESD issuance decision. Instead, our findings indicate the decision to pay ESDs is related to the level of loans that are close to maturity, REIT size, growth prospects and poor performance during the financial crisis. Furthermore, we find that the same factors determine the ratio, amount and frequency of stock dividends issued by these REITs. We also examine the response of shareholders to ESDs announcements and find positive abnormal returns surrounding these dividend announcements.     

Employer‐Sponsored Training and Longer‐Tenured Workers: Evidence from Australia

I estimate the incidence and intensity of training with particular emphasis on where along the tenure‐training profile formal training occurs. Using data from the Survey of Education and Training gathered by the Australian Bureau of Statistics, I find a different relationship between training and tenure than what is suggested by human capital models. Instead of training being concentrated towards the beginning of the employment relationship, it tends to be evenly distributed along the tenure profile. Such findings are more consistent with theories of wage compression and strategic complementarity than traditional human capital approaches.     

Comments on the Model Testing by Goodwin and Meeran (2012): Comparison of the Utility‐based and the Gompertz Curve Approach for High‐technology Product Sales Forecasting

Starting from a comprehensive examination of recent empirical studies focusing on consumer behavior in high‐technology markets and the resulting identification of factors probably affecting individual buying decisions as well as aggregate product sales, Decker and Gnibba‐Yukawa developed and empirically verified a utility‐based sales forecasting approach in their earlier work. Based on data for 14 consumer electronic products and using the Gompertz curve as a benchmark, Goodwin and Meeran carried out a “more extensive testing” of this proposal. However, at least from a practical point of view, the plausibility of their testing framework regarding the market potential m is not unquestionable. This paper, therefore, first discusses some theoretical aspects of both approaches by addressing issues challenged by Goodwin and Meeran, especially regarding the use of short time series and the consideration of replacement purchases. Then, the quasi‐endogenous estimation method for m favored by Goodwin and Meeran for the Gompertz curve is examined in terms of sensitivity to better understand its influence on sales forecasts, and the adequacy of the suggested range for m in the case of the approach by Decker and Gnibba‐Yukawa is investigated. In addition, the results presented in Goodwin and Meeran are considered from a more distant perspective, and possible causes of the variations in forecasting accuracy are discussed, which finally reveals that the forecasting performance of the utility‐based approach is not that “disappointing” as claimed. It provides more accurate (or at least equivalent) forecasts than the Gompertz curve approach in 64% of the cases considered. Furthermore, if product 14 (portable MP3 players) is excluded from the analysis because of the nonconsideration of probably existing product improvement effects, then the utility‐based approach, on average, outperforms the benchmark in all forecasting years. Altogether, this suggests that the approach by Decker and Gnibba‐Yukawa could achieve more accurate forecasts when applying a more reasonable range for m, rather than varying it between 2 and 15 times the cumulative sales by the end of year 7 as proposed by Goodwin and Meeran. It turns out that the Gompertz curve approach can perform on a par with the utility‐based approach in high‐technology product sales forecasting based on short time series if the market potential m is estimated exogenously. A combination of the outcomes of both approaches can even lead to more accurate forecasts as when being used individually insofar as composite forecasting seems to be a practicable approach to the problem of shorter time series compelled by the accelerated diffusion speed in high‐technology markets, rather than relying on one presumably “best” model.     

Incentives,Monitoring, and Employee Stock Ownership Plans: New Evidence and Interpretations

This paper reviews the theory and evidence for agency theory‐based explanations for employee stock ownership plans found in the financial participation literature. The UK Workplace Employee Relations Survey 1998 is used to test whether share plans substitute for direct monitoring and individual incentives. Contrary to some predictions in the literature, individual incentives are found to be complements of share plans, while other measures of monitoring costs provide mixed results. However, it is found that monitoring costs and a wide range of performance targets explain the conjunction of stock plans and individual incentives. It is suggested that share plans are used to mitigate dysfunctional effects of individual incentives by engendering cooperation and trust, and by broadening the range and time frame of desired performance outcomes.