Debt Conservatism and Debt-Equity Choices: Evidence from REITs’ Unused Debt Capacity

We infer debt conservatism behavior by examining how REITs adjust towards their debt capacity following a capital issue or repurchase decision. It is observed that REITs with high unused debt capacity tend to issue equity which renders them more underleveraged for at least two consecutive years. These high debt buffer REITs also tend to converge slowly towards their debt capacity through repurchase decisions and hold significantly higher unused debt facilities than their low buffer counterparts. These findings are robust to a variety of robustness checks and cannot be explained by the traditional pecking order and trade-off theories of capital structure

UK REIT conversion and institutional ownership dynamic

Purpose – The purpose of this paper is to examine the impact of conversion to REIT status by former listed property companies in the United Kingdom on the level of institutional ownership during the period of 2007–2016. Design/methodology/approach – This paper uses an event study framework to track the change in institutional ownership three years before and after a REIT conversion event. This event study approach circumvents the sample selection bias issue associated with the conversion event wherein the decision to convert to REIT is likely to be endogenous. Findings – Panel regression analysis reveals that changing to REIT status led to a 12.8 and 15.2% increase in institutional ownership and number of institutional investors, respectively. The first order of priority in institutional investors’ investment in REIT shares is their preference for liquidity. Further analysis shows that institutional investors changed their preferences towards characteristics associated with systematic risk, firm age and liquidity after the conversion event by becoming less averse to firm-specific risk, placing more emphasis on firm age and less emphasis on systematic risk and liquidity.Practical implications – Overall, conversion to REIT status helps increase former property companies’ investor base, which is in line with the regulator’s aim to open up the property market to a wide range of investors through the introduction of a REIT regime. Findings from this paper also have policy implications for countries that are considering a REIT regime for their capital market and existing REIT regimes without a formal conversion mechanism. Originality/value – This paper offers, for the first time, evidence on 1) how conversion to REITs influences firms’ institutional ownership and 2) the determinants of converted REITs’ institutional ownership

The Integration of Residential Real Estate Market and Stock Markets : Assessment from ARDL Approach

This thesis examines the long-run and short-run relationship between residential real estate market and stock market in Malaysia during the period of 1988-2004. I take the perspective that real estate prices are the driving forces of stock prices given the fact that the purchase of residential property is an important investment decision to an individual investor. Individual investors are expected to adjust their financial assets allocation based on the changes in house prices with the purpose to maximize their investment utility. Terrace House Price Index and High-Rise Unit Price Index were used as proxies for residential real estate market given the trade-off nature between these properties for an individual investor when come to investment decision. By using Autoregressive Distributed Lag (ARDL) cointegration procedure, the results suggest that residential real estate and stock market are not cointegrated. Further test was also executed by using the All House Price Index as a proxy for residential real estate. The results remained the same where residential real estate market is found to be segmented from the stock market. An exclusian of a variable (Consumer Price Index) that was highly correlated with other independent variables in the ARDL model also does not change the results. This would indicate that investors could diversify their portfolio by investing in the residential real estate and the stock market

Financial flexibility and security issuance decisions

This paper examines the roles of financial flexibility in firms’ security issuance decisions.Focusing on Asian Real Estate Investment Trusts (REITs) that are subject to regulatory debt limit, we construct a direct proxy to financial flexibility measured as the difference between debt limit and actual debt ratio.This unused debt capacity or buffer measures financial flexibility as it indicates how much additional debt a REIT can issue.REITs maintain significant debt buffer in their balance sheet which equals to 25% of the total assets.This buffer has been relatively stable during the 10 years study period indicating a conservative debt policy being adopted by REITs in our sample.Controlling for investment policy, we find that REITs’ security issuance decisions are influenced by its debt buffer in a manner consistent with financial flexibilities hypotheses where REITs with larger (smaller) unused debt capacity are more likely to issue marginal debt(equity) in the next period. The drop in debt buffer due to marginal debt issuance is swiftly replenished in the following six months period after the issuance

Debt conservatism and debt-equity choices: evidence from REITs’ unused debt capacity

We infer debt conservatism behavior by examining how REITs adjust towards their debt capacity following a capital issue or repurchase decision. It is observed that REITs with high unused debt capacity tend to issue equity which renders them more under lever aged for at least two consecutive years. These high debt buffer REITs also tend to converge slowly towards their debt capacity through repurchase decisions and hold significantly higher unused debt facilities than their low buffer counterparts. These findings are robust to a variety of robustness checks and cannot be explained by the traditional pecking order and trade-off theories of capital structure

The Value of Relationships in Real Estate Investment Trusts

Ph.DDOCTOR OF PHILOSOPH

Momentum Effect in Developed and Emerging Stock Markets

The study aims to reaffirm the existence of short-term momentum effect in 13 developed and emerging stock markets where previous literature has a lack of consensus on the issue. Although many studies emphasize on the existence of the momentum effect, still, there is a substantial number of researchers that deny its presence. The contradictory findings of many researchers, over the existence of the momentum effect, raise a serious question as to what extent our stock markets are informationally efficient and whether investors can make abnormal profits by using momentum investment strategies. This study applies the momentum investment strategy, J6K6, to calculate momentum returns. Our study finds a negative significant momentum effect in all 13 stock markets. Although momentum effect is present in 13 countries, yet investors are not able to attain abnormal profit through momentum investing. These findings have utmost importance for practitioners that they should not adopt momentum investment strategies in these countries as these strategies are generating losses. Moreover, stock market regulators should formulate these markets on the notion of an efficient market hypothesis

Dividend Policy Changes In The Pre-, Mid-, And Post-financial Crisis: Evidence From The Nigerian Stock Market

This paper examines the impact of the global financial crisis on Nigerian listed firms' dividend policies. Our findings indicate that firms adjust their dividend policies in a manner consistent with the need to preserve financial flexibility and mitigate goingconcern risks during the crisis period. Specifically, highly leveraged firms and firms with low cash flows are more likely to omit dividend payments during the crisis. Moreover, the negative effects of foreign ownership on dividend payments during the pre-crisis are muted during the crisis. This suggests that the tax-induced clientele effect became irrelevant as cash dividends became the first order of business for foreign investors during the crisis. In the same vein, prevailing investor demand for cash dividends exerts a positive influence on firms' probability to increase dividends during the crisis, implying that markets attach a high valuation to firms that are able to pay during the crisis period. We also find support for past dividends as a reference point for current dividend decisions in both the crisis and non-crisis periods, although the relation is weakened during the crisis. This implies that some managers strive to maintain stable dividends during the crisis period. Nevertheless, their ability to do so weakens during this period

Implication of catering theory of dividend: Evidence from financial firms listed on the Nigerian Stock Exchange

The increasing number of non-payers of dividend on the Nigerian Stock Exchange stimulates the interest to reexamine the determinants of payouts decisions in the market.This necessitates seeking alternative explanation for the dividend behavior of firms beyond the traditional determinants that have been established overtime.This paper examines the implication of the catering theory of dividend on the Nigerian Stock Exchange.Based on a sample of 386 firm-year observations drawn from 49 financial firms listed on the exchange, the study investigates the role of dividend premium (proxy for catering theory) and other firm level characteristics on dividend payout of the sampled firms. Panel data analysis was conducted using both fixed effect and random effect estimates. Based on the random effect estimates which is preferred by the Hausman test conducted, findings of the study shows that dividend premium have significant positive effect on dividend payout.Thus, indicating support for the catering theory of dividend.However, result indicates further that the theory is not supported during crisis. Findings also revealed that firm level characteristics which include size, profitability, cash flow, and past dividend are significant in explaining dividend payout of the sampled firms

Do dividends pattern follow earnings pattern? Evidence from Nigerian financial sector

The argument that the relationship between earnings and dividend have weakened stimulates the interest to revisit the relationship. The study adopts two approaches in testing this relationship.Using descriptive analysis, the study follow the approach of recent empirical studies in developed market to test whether dividend concentration exists among financial firms in the Nigerian market and whether this is driven by earnings concentration among the firms. Secondly, the study tests the relationship between earnings and dividend in a regression model to confirm whether this relationship has weakened or not. Findings based on a sample of 49 financial firms on the Nigerian Stock Exchange indicates presence of dividend concentration and show that this is as a result of earnings concentration.Findings from fixed effects regression estimates also indicate that earnings have strong predictive power in explaining dividend payout even when other determinants are accounted for. Based on the combined evidence from descriptive analysis and regression results, the study concludes that dividends are sensitive to earnings and the relationship between the two remain strong in explaining payout policies in the Nigerian financial service sector