Capital market supply and REITs’ financing and investment decisions

Abstract

Purpose – In the wake of the recent financial crisis, there has been extensive commentary regarding the rise and fall of REIT leverage, how much debt REITs should use, and the trendy “deleveraging” practice among REIT managers. The paper aims to discuss these issues. Design/methodology/approach – Identifying the late 2000s credit crunch as a supply shock, the paper uses difference-in-difference methodology to isolate alternative firm financing strategies and investment decision responses to the shock. Findings – Consistent with corporate survey results, this empirical analysis suggests that changes in capital structure are largely supply driven, and REIT managers “time” the debt market in response to credit conditions. Originality/value – This research clarifies the causes of the documented leverage pattern and provides fresh insights about REIT capital structure.

The Sensitivity of Firms’ Investment to Uncertainty and Cash Flow: Evidence From Listed State-Owned Enterprises and Non-State-Owned Enterprises in China

“…Cf represents the cash flow ratio, computed as the ratio of net profits and depreciation to total assets (Cleary, 2005;Lima Crisóstomo et al, 2014;Phan, 2018). Lev denotes the leverage of a firm, measured as the ratio of total liabilities to total assets (Bai et al, 2014;Chow et al, 2018). Tobin's Q is the ratio of the sum of the market value of equity and total liabilities to lagged total assets (Wang et al, 2017).…”

“…Size denotes firms' size in terms of total assets (Bai et al, 2014;Chow et al, 2018). f i and f t represent the industry and time fixed-effect, respectively.…”