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Cross-listing of real estate investment trusts (REITs)

Cross-listing of real estate investment trusts (REITs) PurposeThe purpose of this paper is to examine the common stock price reaction and the changes to the risk exposure of the cross-listing for real estate investment trusts (REITs).Design/methodology/approachThe paper adopts the event study methodology to assess the abnormal returns (ARs). Pre- and post-cross-listing changes in the risk exposure for the domestic and foreign markets are examined, via a modified two-factor international asset pricing model. A comparison is made for two broad cross-listings, namely, the depositary receipts and the dual ordinary listings, to examine the impacts from institutional differences.FindingsCross-listed REITs generally experience positive and significant ARs throughout the event window, implying significant superior returns associated with the cross-listing for REITs. On systematic risks, REITs exhibit significant decline in their domestic market β coefficients after the cross-listing. However, the foreign market β coefficients do not yield conclusive evidence when compared across the sample.Research limitations/implicationsResults are consistent with prudential asset allocation for potential diversification gains from the cross-listing, as the reduction from the domestic market beta is more significant than changes in the foreign market beta.Practical implicationsThe results and findings should incentivise REIT managers to explore viable cross-listing.Social implicationsSuch cross-listing for REITs should enhance risk diversification.Originality/valueThis is a pioneer study on cross-listing of REITs. It provides a basis for investment decision making, and could provoke further research and discussion. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Property Investment & Finance Emerald Publishing

Cross-listing of real estate investment trusts (REITs)

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1463-578X
DOI
10.1108/JPIF-08-2016-0063
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to examine the common stock price reaction and the changes to the risk exposure of the cross-listing for real estate investment trusts (REITs).Design/methodology/approachThe paper adopts the event study methodology to assess the abnormal returns (ARs). Pre- and post-cross-listing changes in the risk exposure for the domestic and foreign markets are examined, via a modified two-factor international asset pricing model. A comparison is made for two broad cross-listings, namely, the depositary receipts and the dual ordinary listings, to examine the impacts from institutional differences.FindingsCross-listed REITs generally experience positive and significant ARs throughout the event window, implying significant superior returns associated with the cross-listing for REITs. On systematic risks, REITs exhibit significant decline in their domestic market β coefficients after the cross-listing. However, the foreign market β coefficients do not yield conclusive evidence when compared across the sample.Research limitations/implicationsResults are consistent with prudential asset allocation for potential diversification gains from the cross-listing, as the reduction from the domestic market beta is more significant than changes in the foreign market beta.Practical implicationsThe results and findings should incentivise REIT managers to explore viable cross-listing.Social implicationsSuch cross-listing for REITs should enhance risk diversification.Originality/valueThis is a pioneer study on cross-listing of REITs. It provides a basis for investment decision making, and could provoke further research and discussion.

Journal

Journal of Property Investment & FinanceEmerald Publishing

Published: Aug 7, 2017

References