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Information Asymmetry and REIT Capital Market Access

Author

Listed:
  • Elizabeth Devos

    (Eastern Michigan University)

  • Erik Devos

    (University of Texas at El Paso)

  • Seow Eng Ong

    (National University of Singapore)

  • Andrew C. Spieler

    (Hofstra University)

Abstract

REITs hold relatively little cash and access capital markets often due to their favorable dividend tax status. The transparent nature of REITs, in theory, implies low information asymmetry. However, we present evidence that this phenomenon is temporal. We find that information asymmetry is relatively low when REITs access the capital markets, when compared to non-accessing periods, based on bid-ask spreads for a large number of REITs. Further, we find that REIT size and turnover affect bid-ask spreads, but the pattern of lower bid-ask spreads surrounding capital market access does manifest itself when we investigate subsamples, dependent on size and turnover. Our findings are consistent with the idea that REITs increase their disclosure when they access the capital markets, which in turn lowers information asymmetry.

Suggested Citation

  • Elizabeth Devos & Erik Devos & Seow Eng Ong & Andrew C. Spieler, 2019. "Information Asymmetry and REIT Capital Market Access," The Journal of Real Estate Finance and Economics, Springer, vol. 59(1), pages 90-110, July.
    • Handle: RePEc:kap:jrefec:v:59:y:2019:i:1:d:10.1007_s11146-018-9678-8
    DOI: 10.1007/s11146-018-9678-8
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    3. Dongshin Kim & Dongkuk Lim & Jonathan A. Wiley, 2023. "Narrative Investment-Risk Disclosure & REIT Investment," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 542-567, February.
    4. Elizabeth Devos & Erik Devos & He Li & Desmond Tsang, 2022. "Operating Lease as Alternative Financing for REITs: a Viable Strategy or a Sign of Trouble?," The Journal of Real Estate Finance and Economics, Springer, vol. 65(2), pages 153-180, August.
    5. Daoju Peng & Jianfu Shen & Simon Yu Kit Fung & Eddie C. M. Hui & Kwokyuen Fan, 2024. "The Valuation Effect and Consequences of Clawback Adoption in Real Estate Investment Trusts," The Journal of Real Estate Finance and Economics, Springer, vol. 68(2), pages 274-317, February.
    6. Dan W. French & Thibaut G. Morillon & Adam S. Yore & Andrew E. Kern, 2023. "The impact of exchange listing on corporate governance: Evidence from direct listings," The Financial Review, Eastern Finance Association, vol. 58(2), pages 197-234, May.
    7. Zifeng Feng & Zhonghua Wu, 2023. "ESG Disclosure, REIT Debt Financing and Firm Value," The Journal of Real Estate Finance and Economics, Springer, vol. 67(3), pages 388-422, October.

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