Media and Foreign Institutional Ownership of European REITs

Institutional real estate investors commonly invest in real estate via investments in publicly traded real estate investment trusts (REITs). Recently, the increasing flow of investment from international investors into REITs sector come from foreign institutional investors. Foreign investors vary in sophistication, business strategy and practices, governance, and capital sources, so the handy information from media news will impact their preferences for REITs instantly. The wave of news from media has largely changed the structure of investors' information, which affect investors investment preferences (Ron and Robert 2017). The information availability and quality are important factors that influence foreign investors’ decisions in building their investment portfolios. Although foreign investors could obtain information through various sources, they face significant information disadvantage compared to domestic investors (Choe et al. 2005; Leuz, 2006; Chan et al.2008). Media from the home country of foreign investors (i.e., home media) could minimize these barriers by broadcasting in its home language and commenting on news from its home perspective. This paper aims to investigate whether foreign investors rely more on home media (than domestic media) to make their foreign investment decisions. Furthermore, institutional investors hold large ownership stakes in European REITs. The traditional view is that institutions are both long-term and passive investors (Devos et al.2013), so the institutional investors tend to find out the more efficient information. Most literature suggests that media coverage reduces the information asymmetry in financial markets (Bushee et al. 2010; Blankespoor et al. 2014) and plays a corporate governance role (Dyck et al. 2010; Dai et al. 2015). However, it is not clear whether the domestic and foreign media play a different role in providing information to foreign investors in European REITs. This paper aims to resolve the puzzle by answering that whether higher media coverage from a particular foreign country is expected to increase European REITs’ foreign ownership from that country or not. I investigate this relationship over the period from 2000 to 2017 by matching the second-rate media news with the yearly European REITs ownership data. This paper highlights the different sources of media news impact on foreign institutional investors’ ownership of European REITs, which provides important implications for European REITs...