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Areit Bidder Returns an Evaluation of Public and Private Targets and Method of Payment

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  • Chris Ratcliffe
  • Bill Dimovski

Abstract

We examine the wealth effects of fifty-six Australian Real Estate Investment Trusts (A-REITs) acquirers around the announcement date of a merger and acquisition over the period of 1996 to 2010. Utilising event study methodology we find that bidding A-REITs earn positive and significant cumulative excess returns (CARs) of +0.966% around the three-day announcement period [-1,+1]. Analysis also indicates bidding firms earn higher CARs when the acquisition is financed by scrip and/or a combination of scrip and cash. Consistent with prior REIT research, event study results show that A-REIT acquirers earn higher excess returns when the target is private as compared to a public target, +2.834% and +0.457% respectively. Further investigation, employing regression analysis, shows book-to-market ratio has a negative impact on bidding firms CARs, suggesting low (high) book-to-market ratio firms are overvalued (undervalued). We also find that specialisation by property type has a positive and significant influence on bidder excess returns. Finally, our results show support for the method of payment findings in the event study, with method of payment returning a negative and significant impact on bidder CARs.

Suggested Citation

  • Chris Ratcliffe & Bill Dimovski, 2011. "Areit Bidder Returns an Evaluation of Public and Private Targets and Method of Payment," ERES eres2011_45, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2011_45
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    File URL: https://eres.architexturez.net/doc/oai-eres-id-eres2011-45
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    Cited by:

    1. Steffen Westermann & Scott Niblock & Michael Kortt, 2018. "Corporate social responsibility and the performance of Australian REITs: a rolling regression approach," Journal of Asset Management, Palgrave Macmillan, vol. 19(4), pages 222-234, July.

    More about this item

    JEL classification:

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

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