CAN RAINMAKERS JUSTIFY THEIR PAY? THE ROLE OF INVESTMENT BANKS IN REIT M&AS

Abstract

This study explicitly rejects the prima facie proposition that the top-tier investment banks are capable of delivering supernormal value creation to the shareholders of a REIT acquirer in a corporate acquisition. Using the event study method, we find that REIT acquirers advised by market-leading investment banks suffer an average cumulative abnormal return of −4.41% following the M&A announcement, whereas REIT acquirers advised by non-top-tier investment banks only suffer an average cumulative abnormal return of −1.49%. The evidence shows that the contemporary practice of employing investment banks based on the prestige of the advisory firms could potentially result in value-destroying M&As for the REIT acquirers.

Pass-Through Business Entity Choice and Earnings Management: Evidence From Uk Real Estate Investment Trust Conversion

“…Existing literature has investigated the unique market performance of pass-through entities like REITs compared to other publicly traded firms, suggesting that REITs use specialized managerial approaches (Zhang et al, 2021;Derwall et al, 2009;Glascock et al, 2000). However, very little research has been conducted to investigate the different managerial behaviors, especially financial disclosure behaviors in this field (Deng & Ong, 2018;Liang & Dong, 2019).…”