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Banking Relationships and Holding-Up in REIT Lending: Empirical Evidence from Asian Markets

Author

Listed:
  • Yuan-Chen Chang
  • Yi-Ting Hsieh
  • Kiat Ying Seah
  • Tien Foo Sing

Abstract

Banking relationships and holding-up are two possible factors that influence the lending decisions by firms. As argued by Diamond (1984), financial intermediaries such as banks, play an important role of costly monitoring of loan contracts due to information asymmetries and moral hazard problems. Using a set of comprehensive cross-country dataset on REIT loan facilities containing past banking relationships, this paper empirically determines the relative importance of REIT-Bank lending relationship on credit supply and the cost of capital. We find that REITs with a stronger lending relationship enjoy the following favourable terms: lower cost loans, higher loan amount, and a less stringent collateral requirement. These terms persist throughout the Great Recession periods and remain even when we control for endogenous relationships.

Suggested Citation

  • Yuan-Chen Chang & Yi-Ting Hsieh & Kiat Ying Seah & Tien Foo Sing, 2018. "Banking Relationships and Holding-Up in REIT Lending: Empirical Evidence from Asian Markets," ERES eres2018_72, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2018_72
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    More about this item

    Keywords

    Banking Relationships; Capital Structure; Holding-Up; Information Asymmetry; REIT;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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