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Are Secondary Equity Offerings of BEE REITs Less Underpriced than Non-BEE REITs?

Author

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  • Oluwaseun Damilola Ajayi
  • Omokolade Akinsomi

Abstract

Purpose: Using real estate investment trusts as a unique laboratory, we investigate the impact of the Black Economic Empowerment policy on seasoned equity offering (SEO) price dynamics.Methodology: 52 SEOs issued by 29 REIT firms (based on availability of data) from January 1, 2010, to December 31, 2020 were retrieved from the Stock Exchange News Service (SENs) of the Johannesburg Stock Exchange (JSE).Findings: Using OLS regression in analysing our data, evidence indicates that BEE is positively related to SEO underpricing; in other words, SEOs of BEE compliant REITs are less underpriced compared to non-compliant BEE REITs.Implication: Evidence also suggests that the BEE policy needs to be recalibrated owing to its politicization as this will enhance compliance from REITs.Originality: This is a pioneer attempt at providing insights for subsequent studies of this nature.

Suggested Citation

  • Oluwaseun Damilola Ajayi & Omokolade Akinsomi, 2021. "Are Secondary Equity Offerings of BEE REITs Less Underpriced than Non-BEE REITs?," AfRES 2021-034, African Real Estate Society (AfRES).
    • Handle: RePEc:afr:wpaper:2021-034
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    More about this item

    Keywords

    Black Economic Empowerment; Economic Policy; seasoned equity offerings; Underpricing;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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