Internal Liquidity and REIT Excess Returns
Journal
證券市場發展季刊
Journal Issue
26
Pages
113-154
Date Issued
2014-12
Author(s)
Abstract
Because tax codes require real estate investment trusts (REITs) to distribute at least 90% of taxable income to shareholders, REITs are stocks with less management's discretion in payout policy and most of their investors demand high dividends. Investors therefore may charge a premium for the risk that REITs are unable to pay legally required dividends due to insufficient internal liquidity. Our firm-level results confirm this premium. The internal liquidity effect becomes weaker (stronger) when a REIT's information uncertainty (leverage) is lower (higher). Besides, empirical investigations at aggregate level produce similar results. Moreover, empirical results also show that the influence of internal liquidity on REIT excess returns is larger in the subprime mortgage crisis period than in the pre-subprime mortgage crisis period.These findings are robust when controlling for other variables affecting REIT's excess returns.
Type
journal article