Explaining the Variation in REIT Capital Structure: The Role of Asset Liquidation Value

We test the Shleifer‐Vishny hypothesis that asset liquidation values influence both firm leverage and the choice of debt maturity. Using panel data on real estate investment trusts, we estimate a simultaneous equation model and find that firms specializing in the most (least) liquid assets use more...

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Bibliographic Details
Published in:Real estate economics 2008-03, Vol.36 (1), p.111-137
Main Authors: Giambona, Erasmo, Harding, John P., Sirmans, C.F.
Format: Article
Language:English
Subjects:
Capital structure
Economic models
Leverage
Liquidation
Maturity
REITs
Studies
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Summary:We test the Shleifer‐Vishny hypothesis that asset liquidation values influence both firm leverage and the choice of debt maturity. Using panel data on real estate investment trusts, we estimate a simultaneous equation model and find that firms specializing in the most (least) liquid assets use more (less) leverage and longer (shorter) maturities. The evidence also suggests that, for REITs, debt maturity and leverage are substitutes, consistent with the theory and predictions of Barclay, Marx and Smith.
ISSN:1080-8620
1540-6229
DOI:10.1111/j.1540-6229.2008.00209.x