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Impact of financing method on J-REIT unit price around seasoned equity offerings: Dilution and borrowing ratio effects on abnormal returns

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  • Ota, Akira
  • Takahashi, Hiroshi

Abstract

This study attempts to identify the determinants of changes in real estate investment trust (REIT) unit prices at the time of seasoned equity offering (SEO) in the Japanese financial market. As Japanese REIT (J-REIT) announces SEOs, dividends, and borrowings at the same time, this analysis can consider each factor simultaneously. This study uses the event study method to conduct an ordinary least squares multivariate regression analysis (regression analysis) of the average cumulative abnormal return for 11 days during SEOs in J-REIT. We add the change in a borrowing ratio before and after an SEO and the dilution ratio of investment units from the perspective of the financing method as new candidate factors not used in previous studies. The sample period is from 2013 to 2017, and the number of the analyzed SEOs is 150. This study simultaneously analyzes the impact of the changes in dividends, the changes in borrowing ratios, and the dilution ratios on J-REIT unit prices at the time of SEOs and clarifies each impact. This study showed that investors were aware of the importance of the dilution impact from the perspective of net asset value as well as the dividend as profitability. Unlike previous studies, we also showed that the increase in the borrowing ratio negatively affected the unit price.

Suggested Citation

  • Ota, Akira & Takahashi, Hiroshi, 2025. "Impact of financing method on J-REIT unit price around seasoned equity offerings: Dilution and borrowing ratio effects on abnormal returns," Pacific-Basin Finance Journal, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:pacfin:v:91:y:2025:i:c:s0927538x25000496
    DOI: 10.1016/j.pacfin.2025.102712
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    References listed on IDEAS

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    1. Cai, Jun & Loughran, Tim, 1998. "The performance of Japanese seasoned equity offerings, 1971-1992," Pacific-Basin Finance Journal, Elsevier, vol. 6(5), pages 395-425, November.
    2. Ghosh, Chinmoy & Nag, Raja & Sirmans, C F, 1999. "An Analysis of Seasoned Equity Offerings by Equity REITs, 1991 to 1995," The Journal of Real Estate Finance and Economics, Springer, vol. 19(3), pages 175-192, November.
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    4. Fukuda, Atsuo, 2000. "Dividend changes and earnings performance in Japan," Pacific-Basin Finance Journal, Elsevier, vol. 8(1), pages 53-66, March.
    5. Marc Simpson & John Emery & Jose Moreno, 2009. "Overreaction and Underreaction to REIT Dividend Announcements and the Role of Monetary Policy," Journal of Real Estate Portfolio Management, Taylor & Francis Journals, vol. 15(3), pages 289-298, January.
    6. Asquith, Paul & Mullins, David Jr., 1986. "Equity issues and offering dilution," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 61-89.
    7. Chinmoy Ghosh & Raja Nag & C. F. Sirmans, 2000. "The Pricing of Seasoned Equity Offerings: Evidence from REITs," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 28(3), pages 363-384.
    8. Miu, Peter & Yueh, Meng-Lan & Han, Jing, 2021. "Performance of Japanese leveraged ETFs," Pacific-Basin Finance Journal, Elsevier, vol. 65(C).
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