REIT Going Private Decisions

Over the recent decade there was a wave of REITs going private, from an average of about three per year to 40 between 2005 and 2007. Standard corporate finance theory posits that firms go private when there is no longer a positive tradeoff between the expected benefits and the costs of being public, and it provides empirical evidence that going private decisions are motivated by potential gains from leverage, tax benefits, and expected improvements in corporate governance. Given the unique institutional environment for the REIT industry, this paper sheds new light on the going-private decision. Specifically, we examine the determinants of the going-private decision and document announcement wealth changes using a sample of 160 REITs from 1985 to 2009. We find firm performance and agency-related factors significantly impact the probability that a REIT announces to go private. We find that the passage of Sarbanes-Oxley and a proxy for differential performance in the private and public markets have no significant impact on the decision. The announcement day abnormal return is almost 12% and the three-day abnormal return is 15%, magnitudes that are both statistically and economically significant. Variations in the market reaction are associated with lower levels of cash and higher stock price volatility. Overall, we document a new set of going-private factors and wealth impacts for the REIT industry that are unique from those of previous corporate finance literature.     

Contents of Volume 28

Volume Contents

Contents of Volume 28     

Network position and health care worker infections

We use a newly collected data set coupled with an agent-based model to study the spread of infectious disease in hospitals. We estimate the average and marginal infections created by various worker groups in a hospital as a function of their network position in order to identify groups most crucial in a hospital-based epidemic. Surprisingly, we find that many groups with primary patient care responsibilities play a small role in spreading an infectious disease within our hospital data set. We also demonstrate that the effect of different network positions can be as important as the effect of different transmission rates for some categories of workers.     

Domestic market integration and the law of one price in Brazil

This article presents the first assessment of domestic market integration in Brazil using the law of one price. The law of one price is tested using two panel unit root methodologies and a unique data set comprising price indices for 51 products across 11 metro-areas. We find that the law holds for most tradable products and, not surprisingly, nontradable products are found to be less likely to satisfy the law of one price. While these findings are consistent with evidence found for other countries, price convergence occurs very slowly in Brazil, suggesting relatively limited domestic market integration.     

Towards a global multi-regional environmentally extended input-output database

This paper presents the strategy for a large EU-funded Integrated Project: EXIOPOL (“A New Environmental Accounting Framework Using Externality Data and Input-Output Tools for Policy Analysis”), with special attention for its part in environmentally extended (EE) input-output (IO) analysis. The project has three principal objectives:

(a)

to synthesize and further develop estimates of the external costs of key environmental impacts for Europe;

(b)

to develop an EE IO framework for the EU-27 in a global context, including as many of these estimates as possible, to allow for the estimation of environmental impacts (expressed as LCA themes, material requirement indicators, ecological footprints or external costs) of the activities of different economic sectors, final consumption activities and resource consumption;

(c)

to apply the results of the work to external costs and EE I-O for illustrative policy questions.

     

‘I Like How You Think’: Similarity as an Interaction Bias in the Investor–Entrepreneur Dyad

Investigating the factors that influence venture capital decision‐making has a long tradition in the management and entrepreneurship literatures. However, few studies have considered the factors that might bias an investment decision in a way that is idiosyncratic to a given investor–entrepreneur dyad. We do so in this study. Specifically, we build from the literature on the ‘similarity effect’ to investigate the extent to which decision‐making process similarity (shared between the investor and the entrepreneur) might bias or otherwise impact the investor's evaluation of a new venture investment opportunity. Our findings suggest venture capitalists evaluate more favourably opportunities represented by entrepreneurs who ‘think’ in ways similar to their own. Moreover, in the presence of decision‐making process similarity, the impacts of other factors that inform the investment decision actually change in counter‐intuitive ways.     

Decomposing the declining volatility of long-term inflation expectations

The level and volatility of survey-based measures of long-term inflation expectations have come down dramatically over the past several decades. To capture these changes in inflation dynamics, we embed both short- and long-term expectations into a medium-scale VAR model with stochastic volatility. The model estimates attribute most of the marked decline in the volatility of expectations to smaller shocks to long-run inflation expectations. According to our estimates, the volatility of shocks plummeted in the early to mid-1980s, moved to a somewhat higher level that prevailed for much of the 1990s, and then declined to and remained at very low levels.     

Understanding Urban Public Space in a Leisure Context

For many people, the city is a landscape of everyday life. In cities, public spaces serve as venues for social interaction, sociability, conviviality, and the enactment of community. Despite their relevance to community life, however, urban spaces remain underexamined in the leisure literature. If researchers seek to understand leisure in the context of everyday experiences, they must also consider the spatial perspective in which leisure activities are pursued. In this research reflection, we argue that urban public spaces and some private spaces are fundamentally leisure settings that warrant greater research attention. We propose to broaden the conceptual understanding of what constitutes urban public space by outlining four categories of urban space based on ownership and accessibility.     

Good governance in protected areas: an evaluation of stakeholders’ perceptions in British Columbia and Ontario Provincial Parks

As government funding is reduced and tourism-based fees are increasingly used to fund protected area operations, two options are often used for management: transfer of tourism services to the private sector or operation of tourism services by a government agency that functions like a corporation. This paper reports stakeholders’ views concerning governance for two prominent, but different, management models for protected areas’ tourism services in Canada. British Columbia Provincial Parks uses profit-making companies to deliver park services; Ontario Provincial Parks uses the parastatal approach, where park staff members provide most services directly. Surveys of five key stakeholder groups (park staff, visitors, contractors working in park, nearby residents and NGOs with an interest in parks) provided higher rankings of perceptions of governance criteria closer to good governance for the Ontario approach, with important differences found between some groups and amongst some criteria in both park systems. This research suggests that the parastatal model is perceived as superior by important stakeholder groups, using the lens of standard governance criteria, compared to the outsourcing model that uses profit-making companies to provide park tourism services. This finding has implications globally where governments seek to shift park funding from government towards tourism fees and charges.