Are REIT Dividend Changes a Firm-Specific or an Industry-Level Signal? Evidence From the Decomposition of Stock Returns

This study examines the firm-specific and industry-level effects of dividend announcements by equity real estate investment trusts (REITs). Using stock returns to measure the information impounded in stock prices from dividend announcements, we decompose stock returns into three return components: f...

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Bibliographic Details
Published in:The journal of real estate portfolio management 2022-01, Vol.28 (2), p.139-152
Main Authors: Chiou, Jong-Rong, Huang, Gow-Cheng, Liano, Kartono, Pan, Ming-Shiun
Format: Article
Language:English
Subjects:
Announcements
Investment trusts
Payments
Prices
Stock prices
Trusts
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Summary:This study examines the firm-specific and industry-level effects of dividend announcements by equity real estate investment trusts (REITs). Using stock returns to measure the information impounded in stock prices from dividend announcements, we decompose stock returns into three return components: firm-specific, industry-level, and market-wide. This decomposition allows us to examine the relative importance of the firm-specific and industry-level information contained in dividend announcements. We find that the market reaction to equity REIT dividend changes is mainly driven by the firm-specific return component. We also find that equity REIT managers are more likely to cut (raise) dividend payments when the stock price reveals less (more) firm-specific information. Moreover, the managerial dividend signal can explain the announcement-period firm-specific abnormal return but not the industry-wide abnormal return, suggesting that the managerial dividend signal conveys mainly firm-specific information.
ISSN:1083-5547
2691-1205
DOI:10.1080/10835547.2022.2079215