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Explaining the Variation in REIT Capital Structure: The Role of Asset Liquidation Value

Author

Listed:
  • Erasmo Giambona
  • John P. Harding
  • C.F. Sirmans

Abstract

We test the Shleifer‐Vishny hypothesis that asset liquidation values influence both firm leverage and the choice of debt maturity. Using panel data on real estate investment trusts, we estimate a simultaneous equation model and find that firms specializing in the most (least) liquid assets use more (less) leverage and longer (shorter) maturities. The evidence also suggests that, for REITs, debt maturity and leverage are substitutes, consistent with the theory and predictions of Barclay, Marx and Smith.

Suggested Citation

  • Erasmo Giambona & John P. Harding & C.F. Sirmans, 2008. "Explaining the Variation in REIT Capital Structure: The Role of Asset Liquidation Value," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 36(1), pages 111-137, March.
    • Handle: RePEc:bla:reesec:v:36:y:2008:i:1:p:111-137
    DOI: 10.1111/j.1540-6229.2008.00209.x
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    JEL classification:

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

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