Financial Constraint and Cash Holdings in the REIT Industry

We extend the line of research on the influence of financial constraint on REIT cash holdings and their market value. We measure constraint with a wide variety of traditional proxies in an effort to determine if previous results hold and provide guidance on the use of these constraint measures in RE...

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Bibliographic Details
Published in:The journal of real estate portfolio management 2018-01, Vol.24 (2), p.135-150
Main Authors: Pyles, Mark K., Khieu, Hinh D.
Format: Article
Language:English
Subjects:
Age
Bond markets
Bond ratings
Cash flow
Credit ratings
Economic models
Economics
Funding
Hill, Kelly
Hypotheses
Market value
Ratings & rankings
Real estate financing
REITs
Researchers
Variables
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Description
Summary:We extend the line of research on the influence of financial constraint on REIT cash holdings and their market value. We measure constraint with a wide variety of traditional proxies in an effort to determine if previous results hold and provide guidance on the use of these constraint measures in REIT studies. We confirm, consistent with both expectation and the literature, that constrained firms hold more cash than their unconstrained counterparts. However, contrary to previous works, we find little evidence that traditional measures of constraint play a role in the market value of cash. Further, our results suggest that the method of measuring constraint should be carefully considered when applying to the REIT industry. In particular, the KZ index provides results that differ substantially from those of other criteria.
ISSN:1083-5547
2691-1205
DOI:10.1080/10835547.2018.12090014