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The Consequences Of Reit Index Membership For Return Patterns, Andrey Pavlov, Eva Steiner, Susan Wachter
The Consequences Of Reit Index Membership For Return Patterns, Andrey Pavlov, Eva Steiner, Susan Wachter
Eva Steiner
The impact of stock market index membership on REIT stock returns is unclear. Returns may become more like those of other indexed stocks and less like those of their underlying properties. Taking advantage of the inclusion of REITs in major S&P indexes starting in 2001, we find that shared index membership significantly increases the correlation between REIT returns. However, index membership also enhances the link between REIT returns and the underlying real estate, consistent with improved pricing efficiency.
Financial Flexibility And Manager-Shareholder Confict: Evidence From Reits, Timothy Riddiough, Eva Steiner
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.
The Consequences Of Reit Index Membership For Return Patterns, Andrey Pavlov, Eva Steiner, Susan Wachter
The Consequences Of Reit Index Membership For Return Patterns, Andrey Pavlov, Eva Steiner, Susan Wachter
Eva Steiner
We study the impact of S&P index membership on REIT stock returns. Given the hybrid nature of REITs, their returns may become more like those of other indexed stocks and less like those of their underlying properties. The existing literature does not offer clear predictions on these potential outcomes. Taking advantage of the inclusion of REITs in major S&P indexes starting in 2001, we find that shared index membership significantly increases the correlation between REIT returns after controlling for the stock characteristics that determine index membership. We also document that index membership enhances the link between REIT stock returns and …
Reit Capital Structure Choices: Preparation Matters, Andrey Pavlov, Eva Steiner, Susan Wachter
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 …