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Information Asymmetry and Organizational Structure: Evidence from REITs

Author

Listed:
  • Yongheng Deng

    (National University of Singapore)

  • Maggie (Rong) Hu

    (University of New South Wales)

  • Anand Srinivasan

    (National University of Singapore)

Abstract

We test for the differences in information asymmetry across two organizational forms (external and internal) in the REIT industry. We find significant differences with external REITs being significantly more transparent relative to internal REITs, and these differences are reflected in the loan contract terms and loan syndicate structure of loans made to these two types of REITs. We find that the relatively more transparent externally advised REITs are offered more favourable loan contracts in terms of lower loan rates and lower likelihood of collateral requirement. Further, loans to external REITs have syndicates that are larger in size and the lead lender retains a smaller portion of the loan, reflecting lower information asymmetry.

Suggested Citation

  • Yongheng Deng & Maggie (Rong) Hu & Anand Srinivasan, 2017. "Information Asymmetry and Organizational Structure: Evidence from REITs," The Journal of Real Estate Finance and Economics, Springer, vol. 55(1), pages 32-64, July.
    • Handle: RePEc:kap:jrefec:v:55:y:2017:i:1:d:10.1007_s11146-016-9550-7
    DOI: 10.1007/s11146-016-9550-7
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    More about this item

    Keywords

    External advisor; Real estate investment trust (REIT); Organizational structure; Loan contract terms; Information opacity; Certification effect;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • L00 - Industrial Organization - - General - - - General
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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