This paper analyses the board composition of Australian initial public offerings (IPOs) over the period 1994 to 1997. The recent management literature identifies a wide range of stakeholders beyond the traditional shareholders. Evan and Freeman, and Jones and Goldberg suggest that the importance of stakeholders should be reflected in board representation. Luoma and Goodstein provide evidence of increased stakeholder representation on the boards of American companies. This paper studies Australian IPOs and finds that this is not the case. This suggests that capital raising by new lists in the Australian equity market does not require stakeholder representation on the board.

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ABSTRACT

The study investigates a variety of characteristics surrounding Australian Real Estate Investment Trust (A-REIT) private placements with a dataset of A-REIT private placements from July 2006 to June 2011. The private placement of equity securities raised over A$lO.4 billion for A-REITs during this period of which nearly A$7.3 billion was raised after the December 2007 Centro Properties liquidity problem announcements and the subsequent global financial crisis, with most of this capital raised during 2008 and 2009. The size and speed of the capital raising continues to suggest that A-REITs are regarded highly by the investment community. Additionally, while the general finance literature suggests that existing shareholders do not fare badly from private placements offered to subscribers issued at a discount, this is the first Australian REIT study to report similar findings.

This paper contributes to the capital structure literature by investigating the determinants of capital structure of Australian Real Estate Investment Trusts (A-REITs) over the period [2006][2007][2008][2009]. By using a panel approach and a Global Financial Crisis (GFC) dummy variable, our analysis incorporates the Global Financial Crisis (GFC) shock which appears to have affected the market after December 2007. We find that A-REIT size, profitability, tangibility, operating risk and number of growth opportunities impact similarly to many previous studies of international entities upon the degree of leverage. We also find mixed support for prevailing capital structure theories of Pecking Order, Trade-off and Agency Theory, but find that Market Timing Theory can be rejected over our sample period. With specific focus after onset of the GFC, we find that the relationship between capital structure and our independent variables is somewhat distorted. Consequently, the postulations of theory also become distorted whereby changes to capital structure come about because of the primary goal to survive, rather than managerial opportunism.