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Sponsor Backing in Asian REIT IPOs

Author

Listed:
  • Woei-Chyuan Wong

    ()

  • Seow-Eng Ong

    ()

  • Joseph Ooi

    ()

Abstract

This paper tests the significance of sponsors in REIT IPOs viz-a-viz quality certification, signal of firm value, and commitment to alleviate moral hazard concerns. We model the REIT pricing and sponsor share retention decisions within a simultaneous decision framework as motivated by Grinblatt and Hwang (Journal of Finance 44:393–420, 1989 ). We find positive and significant bidirectional relationship between the fraction of shares held by the sponsor in IPO and underpricing which is consistent with Grinblatt and Hwang’s (Journal of Finance 44:393–420, 1989 ) signaling model. Our results also support the commitment hypothesis that developers that spin off REITs tend to hold more shares at IPO, possibly to compensate investors for the potential moral hazard problems in the aftermarket. Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • Woei-Chyuan Wong & Seow-Eng Ong & Joseph Ooi, 2013. "Sponsor Backing in Asian REIT IPOs," The Journal of Real Estate Finance and Economics, Springer, vol. 46(2), pages 299-320, February.
  • Handle: RePEc:kap:jrefec:v:46:y:2013:i:2:p:299-320
    DOI: 10.1007/s11146-011-9336-x
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    References listed on IDEAS

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    1. repec:ire:issued:v:20:n:03:2017:p:349-374 is not listed on IDEAS
    2. repec:kap:jrefec:v:55:y:2017:i:3:d:10.1007_s11146-016-9577-9 is not listed on IDEAS
    3. Mamoru Nagano, 2016. "Financing Patterns and Property Acquisitions of Sponsor-backed REITs: Evidence from J-REIT Markets," International Real Estate Review, Asian Real Estate Society, vol. 19(2), pages 223-248.
    4. Dong Chen & Yanmin Gao & Mayank Kaul & Charles Ka Yui Leung & Desmond Tsang, 2016. "The Role of Sponsors and External Management on the Capital Structure of Asian-Pacific REITs: The Case of Australia, Japan, and Singapore," International Real Estate Review, Asian Real Estate Society, vol. 19(2), pages 197-221.
    5. Yuen-Meng Wong, 2016. "Malaysia REITs: First Decade Development and Returns Characteristics," International Real Estate Review, Asian Real Estate Society, vol. 19(3), pages 371-409.

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