Real Estate Commons^™

Financial Flexibility And Manager-Shareholder Confict: Evidence From Reits, Timothy Riddiough, Eva Steiner

Eva Steiner

Using equity REIT data, we show empirically that the use of unsecured debt, which contains standardized covenants that place limits on total leverage and the use of secured debt, is associated with lower leverage outcomes. We then show that firm value is sensitive to leverage levels, where lower leverage is associated with higher firm value. In the presence of weak managerial governance, our results suggest that unsecured debt covenants function as a managerial commitment device that preserves the firm’s debt capacity to enhance financial flexibility.

Reit Capital Structure Choices: Preparation Matters, Andrey Pavlov, Eva Steiner, Susan Wachter

Eva Steiner

Sun, Titman, and Twite (2015) find that capital structure risks, namely high leverage and a high share of short-term debt, reduced the cumulative total return of US REITs in the 2007-2009 financial crisis. We find that mitigating capital structure risks ahead of the crisis by reducing leverage and extending debt maturity in 2006, was associated with a significantly higher cumulative total return 2007-2009, after controlling for the levels of those variables at the start of the financial crisis. We further identify two systematic cross-sectional differences between those REITs that reduced capital structure risks prior to the financial crisis and those …

The Interrelationships Between Reit Capital Structure And Investment, Jamie Alcock, Eva Steiner

Eva Steiner