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The Cost of Financial Flexibility: Information Opacity, Agency Conflicts and REIT at-the-Market (ATM) Equity Offerings

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Listed:
  • George D. Cashman

    (Marquette University, College of Business Administration)

  • David M. Harrison

    (College of Business Administration, University of Central Florida)

  • Shelly Howton

    (Villanova University)

  • Benjamin Scheick

    (Villanova University)

Abstract

Using a sample of publicly traded U.S. REITs, we examine the impact of at-the-market (ATM) equity offerings on participating firms’ cost of capital. While ATM programs can improve a firm’s financial flexibility, capital market access, and market timing capabilities, they also may engender agency conflicts and increase the information opacity of the firm’s operations. Consistent with these adverse effects, we document a positive relation between ATM program availability and the implied cost of equity capital. These core findings are most pronounced for firms that are relatively opaque, thus providing further evidence of an information-based channel for the cost of capital effect.

Suggested Citation

  • George D. Cashman & David M. Harrison & Shelly Howton & Benjamin Scheick, 2023. "The Cost of Financial Flexibility: Information Opacity, Agency Conflicts and REIT at-the-Market (ATM) Equity Offerings," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 505-541, February.
    • Handle: RePEc:kap:jrefec:v:66:y:2023:i:2:d:10.1007_s11146-021-09821-9
    DOI: 10.1007/s11146-021-09821-9
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