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Captive Financing Arrangements and Information Asymmetry: The Case of REITs

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  • Peihwang Wei
  • Cheng‐Ho Hsieh
  • C. F. Sirmans

Abstract

For the sample period of 1985 and 1986, captive real estate investments trusts (REITs) have a larger bid‐ask spread than noncaptive REITs, after controlling for trading volume, price volatility, insider holdings, institutional holdings and firm size. Based on the bid‐ask spread literature, the results suggest that captive firms are subject to a greater degree of information asymmetry. This implies a higher cost of capital for captive firms. The evidence here and the trend toward self‐administered REITs imply that information asymmetry and conflicts of interests within REITs are priced.

Suggested Citation

  • Peihwang Wei & Cheng‐Ho Hsieh & C. F. Sirmans, 1995. "Captive Financing Arrangements and Information Asymmetry: The Case of REITs," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 23(3), pages 385-394, September.
    • Handle: RePEc:bla:reesec:v:23:y:1995:i:3:p:385-394
    DOI: 10.1111/1540-6229.00670
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    Cited by:

    1. Rob Bauer & Piet Eichholtz & Nils Kok, 2010. "Corporate Governance and Performance: The REIT Effect," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(1), pages 1-29, March.
    2. Zifeng Feng & Peng Liu, 2023. "Introducing “Focused Firms”: Implications from REIT Prime Operating Revenue," The Journal of Real Estate Finance and Economics, Springer, vol. 67(3), pages 545-578, October.
    3. Kevin C. H. Chiang & Gregory J. Wachtel & Xiyu Zhou, 2019. "Corporate Social Responsibility and Growth Opportunity: The Case of Real Estate Investment Trusts," Journal of Business Ethics, Springer, vol. 155(2), pages 463-478, March.
    4. Susanne Cannon & Rebel Cole, 2011. "Changes in REIT Liquidity 1988–2007: Evidence from Daily Data," The Journal of Real Estate Finance and Economics, Springer, vol. 43(1), pages 258-280, July.
    5. Nicolas Kohl & Wolfgang Schaefers, 2012. "Corporate Governance and Market Valuation of Publicly Traded Real Estate Companies: Evidence from Europe," The Journal of Real Estate Finance and Economics, Springer, vol. 44(3), pages 362-393, April.
    6. Brent W. Ambrose & Peter Linneman, 2001. "Reit Organizational Structure and Operating Characteristics," Journal of Real Estate Research, American Real Estate Society, vol. 21(3), pages 141-162.

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