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Stock Market Information and REIT Earnings Management

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  • Brent Ambrose
  • Xun Bian

Abstract

This paper investigates the interaction between stock price movement and REIT earnings management. We examine whether information generated from stock price volatility influences managers' incentives to engage in earnings management. Consistent with the efficient markets hypothesis, we find that suspected earnings-management firms do not appear to be more mispriced than others. In addition, using idiosyncratic volatility as a measure of private information embedded in stock price, we find that negative real earnings management, which allows REITs to circumvent the mandatory dividend payout requirement, is associated with greater information embedded in REIT stock prices. The result implies that information contained in stock price volatility motivates REIT managers to more actively avoid regulatory costs.

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  • Brent Ambrose & Xun Bian, 2010. "Stock Market Information and REIT Earnings Management," Journal of Real Estate Research, Taylor & Francis Journals, vol. 32(1), pages 101-138, January.
    • Handle: RePEc:taf:rjerxx:v:32:y:2010:i:1:p:101-138
    DOI: 10.1080/10835547.2010.12091271
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    Cited by:

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    2. Kimouche Bilal, 2021. "The Effect of Stock Market Listing on Real Earnings Management: Evidence From Algerian Companies," Naše gospodarstvo/Our economy, Sciendo, vol. 67(4), pages 96-107, December.
    3. Peres Ofori, 2021. "Mortgage market and climate variability adaptation: evidence from the mortgage market in emerging cities," SN Business & Economics, Springer, vol. 1(12), pages 1-22, December.
    4. Masatomo Suzuki & Seow Eng Ong & Yasushi Asami & Chihiro Shimizu, 2023. "Long-Run Renewal of REIT Property Portfolio Through Strategic Divestment," The Journal of Real Estate Finance and Economics, Springer, vol. 66(1), pages 1-40, January.
    5. Paul Anglin & Robert Edelstein & Yanmin Gao & Desmond Tsang, 2013. "What is the Relationship Between REIT Governance and Earnings Management?," The Journal of Real Estate Finance and Economics, Springer, vol. 47(3), pages 538-563, October.
    6. Jain, Pawan & Upadhyay, Arun, 2021. "Are REITs more resilient than non-REITs? Evidence from natural experiments," Japan and the World Economy, Elsevier, vol. 58(C).
    7. Lee, Chien-Chiang & Chien, Mei-Se & Lin, Tsoyu Calvin, 2012. "Dynamic modelling of real estate investment trusts and stock markets," Economic Modelling, Elsevier, vol. 29(2), pages 395-407.
    8. Siew Bee Thai & Ming Ming Lai, 2021. "An Examination of Prevalence of Earnings Management in Asia REITs," International Journal of Business and Management, Canadian Center of Science and Education, vol. 14(5), pages 1-75, July.
    9. Oluwaseun Damilola Ajayi & Omokolade Akinsomi, 2022. "Do Internally Managed Reits Manage Earnings More Than Externally Managed Reits?," AfRES 2022-043, African Real Estate Society (AfRES).

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