Captive Financing Arrangements and Information Asymmetry: The Case of REITs |
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| Authors: | Peihwang Wei Cheng-Ho Hsieh C. F. Sirmans |
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| Affiliation: | University of New Orleans, New Orleans, LA 70148;Louisiana State University-Shreveport, Shreveport, LA 71115;University of Connecticut, Storrs, CT 06269 |
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| Abstract: | For the sample period of 1985 and 1986, captive real estate investments trusts (REITs) have a larger bid-ask spread than noncaptive REITs, after controlling for trading volume, price volatility, insider holdings, institutional holdings and firm size. Based on the bid-ask spread literature, the results suggest that captive firms are subject to a greater degree of information asymmetry. This implies a higher cost of capital for captive firms. The evidence here and the trend toward self-administered REITs imply that information asymmetry and conflicts of interests within REITs are priced. |
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