Economies of Scale and Cost Efficiencies: A Panel-Data Stochastic-Frontier Analysis of Real Estate Investment Trusts
This paper extends the existing research on real estate investment trust (REIT) operating efficiencies. We estimate a stochastic-frontier panel-data model specifying a translog cost function, covering 1995 to 2003. The results disagree with previous research in that we find little evidence of scale economies and some evidence of scale diseconomies. Moreover, we also generally find smaller inefficiencies than those shown by other REIT studies. Contrary to previous research, the results also show that self-management of a REIT associates with more inefficiency when we measure output with assets. When we use revenue to measure output, selfmanagement associates with less inefficiency. Also contrary with previous research, higher leverage associates with more efficiency. The results further suggest that inefficiency increases over time in three of our four specifications.
|Date of creation:||Jul 2005|
|Date of revision:|
|Publication status:||Published in The Manchester School, July 2006.|
|Note:||Presented at the Money Macro and Finance Research Group conference "Efficiency Analysis in Macroeconomics and Finance," 3 June 2005 at the University of Essex, United Kingdom.|
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