REIT Open-Market Stock Repurchases and Profitability

This study examines whether the announcement of real estate investment trust (REIT) open-market stock repurchase programs contain information content about future operating performance over the period 1990–2001. We find no evidence that REIT stock buybacks are positively related to the operating performance. In fact, the operating performance of our sample REIT firms peak at the repurchase announcement year and deteriorate in the years following the announcement of share repurchases. Nevertheless, the sample REITs show higher levels of post-repurchase operating performance when compared to those of the pre-repurchase period. Additionally, our regression analysis shows that changes in future operating performance can explain the positive announcement effect.     

Dividend decisions in the property and liability insurance industry: mutual versus stock companies

This article examines the effect of organizational forms on corporate dividend decisions by exploring the differences in dividend payout ratios between mutual and stock property–liability (P–L) insurers in the US. Our large sample evidence suggests: (1) mutual insurers tend to have a lower dividend payout ratio than stock insurers and the observed difference is about 4% points, holding other factors constant; (2) mutual insurers tend to adjust dividend payout ratios toward their long-run target levels more slowly than stock firms. These results are consistent with the capital constraints and/or greater agency costs of equity in mutual insurers.

Marketing Period Risk in a Portfolio Context: Comment and Extension

This paper re-examines and extends the findings of Bond et al., Journal of Real Estate Finance and Economics, 34, 447–461, (2007) who consider the theoretical model of Lin and Vandell, Real Estate Economics, 35, 291–330, (2007) to determine the extent to which individual real estate asset return characteristics caused by marketing period risk disappear in a large, diversified real estate portfolio. The effects of marketing period risk are found to disappear in the limit with growth in the size of the portfolio, with ex ante variance approaching ex post variance, but only if the portfolio consists of nonsystematic risk alone, in which case both approach zero. The marketing period risk factor (MPRF), representing the ratio of ex ante to ex post variance, however, does not in general approach zero in the limit, in fact could increase or decrease depending upon the illiquidity characteristics of the individual assets and the magnitude and degree of correlation among individual property returns and marketing periods. The results suggest that even large institutional real estate portfolio managers must consider the illiquidity present in their portfolios and cannot assume that its effect will be diversified away.

Hedge-Fonds als Asset-Klasse: Betrachtungen aus der Perspektive der deutschen Versicherungswirtschaft

The over performance of hedge funds until the current financial market turbulences led to a large number of insurers increasing their hedge funds quota. In the following this asset class is examined and particularly analyzed with respect to its adequacy for an insurance company's asset allocation by focusing on the axiom of safety, as demanded by national law. The problem of survivorship-bias and the Markowitz requirements of normal-distribution and constant correlations among the asset classes and their impact on a strategic asset allocation are studied.     

Managerial Rationale for Entry and the Relation to Performance and Small-Business Lending

In a survey of banks founded from 1994–2002, we find over 85% of respondents think their small-business market was underserved, 72% felt the market needed more competition, almost half indicated they were likely to start a bank because takeover activity displaced them, and 75% entered due to a market merger. Markets of banks started by displaced managers or following a merger have performance and lending characteristics similar to comparable banks, but larger changes in asset growth rates. Managers who responded that small-businesses were underserved have higher numbers and amounts of small-business loans 3 years after entry. Managers responding that entry was due to mergers eliminating community banks have lower ROA, but larger changes in market ROA. Markets had smaller changes in ROA when entry was to provide competition or when managers thought the small business market was underserved.

IMF Bank-Restructuring Efficiency Outcomes: Evidence from East Asia

We report new findings on bank efficiency in East Asian countries for the pre- and post-IMF restructuring periods. We find that bank efficiency has improved, but only to the pre-IMF intervention level, and that restructured banks are not more efficient than their unrestructured counterparts. Different restructuring measures have different effects. Bank closures are economically justified, but mergers show short-term efficiency losses. Recapitalization and reprivatization of badly performing banks lead to efficiency improvement, but also increase government ownership. Ease of entry that has allowed for more foreign bank participation results in slightly improved performance of badly performing banks.

Eine Analyse ultimaten Verhaltens als Erklärungsansatz des moral hazards

For the insurance industry the moral hazard poses an incalculable risk. Changes in the behaviour of the insuree can lead to higher claims settlements and thus to higher premiums for the insured collective. Asymmetrically allocated information gives the insured individual the possibility to profit from the idea of common protection in a way that impairs insurer and the collective on the whole. Based on the homo oeconomicus model, economic concepts, first and foremost the agency theory of new institutional economics have made attempts to provide solutions for this management problem. However, behavioural economic experiments have demonstrated that the homo oeconomicus model does not fully succeed in describing the realities. As a result, the solutions proposed in these economic concepts have to be rated inadequate.The moral hazard is inherent in the conflicting realm of cooperation and defection, behaviour patterns that have evolved during the history of development of human behaviour. Ultimate behaviour analyses of these patterns do offer the opportunity to understand why humans behave in specific ways based on man's evolutionary origins and sources. Consequently, ultimate behaviour analyses could provide a solid foundation for the development of a framework giving insurers the possibility to exert influence on the insuree's behaviour and thus to assist in successfully impacting the moral hazard.     

Residential Asking Rents and Time on the Market

Landlords offering a house in the rental market face a difficult strategic pricing decision. The revenue maximizing decision for the landlord involves a tradeoff between the rental rate and time on the market. Because the turnover of renters is higher than owners, and because the landlord must bear some carrying costs on a vacant house, pricing the rent too high may decrease revenue due to a higher vacancy period and pricing it too low may reduce the revenue when occupied. While there is substantial research on the relationship between listed prices and time on the market for freehold interests, this is the first study to provide empirical evidence on the relationship between asking rent, contract rent and time on the market for single family residential rental (leasehold) property interests. We present two models; a rental price model and a duration model for time-on-the market. Using data from the Dallas–Fort Worth area we find that landlords who set a lower asking rent relative to predicted rent can expect a shorter marketing period for their properties. The results also indicate that overpricing the asking rent and then lowering it at a later date leads to a longer marketing time (after the reset) and often a lower rent. These finding are reasonably robust for low-, mid-, and higher-valued rental properties.

Testing for Bubbles in Housing Markets: A Panel Data Approach

We employ recently developed cross-sectionally robust panel data tests for unit roots and cointegration to find whether house prices reflect house related earnings. We use U.S. data for Metropolitan Statistical Areas, with house price measured by the weighted-repeated-sales index and cash-flows by market tenants’ rents. In our full sample period, an error-correction model is not appropriate, i.e. there is a bubble. We then combine overlapping 10-year periods, price–rent ratios, and the panel data tests to construct a bubble indicator. The indicator is high for the late 1980s, early 1990s and since the late 1990s. Finally, evidence based on panel data Granger causality tests suggests that house price changes are helpful in predicting changes in rents and vice versa. CERGE-EI is a joint workplace of the Center for Economic Research and Graduate Education, Charles University, and the Economics Institute of the Academy of Sciences of the Czech Republic.     

Relationship Banking and the Pricing of Financial Services

We investigate pricing effects of the joint production of loans and security underwritings. We control for firm and borrower characteristics, including differences in sequencing, which are important for pricing. Contrary to previous studies, when banks combine lending and underwriting within the same customer relationship they charge premiums for both loans and underwriting services. Abstracting from effects of joint production within relationships, depository banks engaged in underwriting price lending and underwriting more cheaply than stand alone investment banks. One advantage borrowers enjoy from bundling products within a banking relationship is a form of liquidity risk insurance, which is manifested in a reduced demand for lines of credit. We also find evidence of a “road show” effect; firms enjoy loan pricing discounts on loans that are negotiated at times close to the debt underwritings, whether or not the same bank provides both services. Relationship effects are only visible when lending and underwriting both occur, and are stronger for equity-loan relationships than for debt-loan relationships. Electronic supplementary material  The online version of this article (doi:) contains supplementary material, which is available to authorized users.