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Real Estate Investment Trusts: Regulation and Capital Structure

  • This thesis deals with REITs, their capital structure and the effects on leverage that regulatory requirements might have. The data used results from a combination of Thomson Reuters data with hand-collected data regarding the REIT status, regulatory information and law variables. Overall, leverage is analysed across 20 countries in the years 2007 to 2018. Country specific data, manually extracted from yearly EPRA reportings, is merged with company data in order to analyse the influence of different REIT restrictions on a firm's leverage. Observing statistically significant differences in means across NON-REITs and REITs, causes motivation for further investigations. My results show that variables beyond traditional capital structure determinants impact the leverage of REITs. I find that explicit restrictions on leverage and the distribution of profits have a significant effect on leverage decisions. This supports the notion that the restrictions from EPRA reportings are mandatory. I test for various combinations of regulatory variables that show both in isolation as well as in combination significant effects on leverage. My main result is the following: Firms that operate under regulation that specifies a maximum leverage ratio, in addition to mandatory high dividend distributions, have on average lower leverage ratios. Further the existence of sanctions has a negative effect on REITs' leverage ratios, indicating that regulation is binding. The analysis clearly shows that traditional capital structure determinants are of second order relevance. This relationship highlights the impact on leverage and financing decisions caused by regulation. These effects are supported by further analysis. Results based on an event study show that REITs have statistically lower leverage ratios compared to NON-REITs. Based on a structural break model, the following effect becomes apparent: REITs increase their leverage ratios in years prior REIT status. As a consequence, the ex ante time frame is characterised by a bunker and adaption process, followed by the transformation in the event. Using an event study and a structural break model, the analysis highlights the dominance of country-specific regulation.

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Author:Katharina Klara Bosl
Advisor:Axel F. A. Adam-Müller
Document Type:Doctoral Thesis
Date of completion:2023/07/05
Publishing institution:Universität Trier
Granting institution:Universität Trier, Fachbereich 4
Date of final exam:2023/09/13
Release Date:2023/10/11
GND Keyword:Investmentfonds; Unbewegliche Sache
Number of pages:ix, 198 Blätter
First page:i
Last page:198
Institutes:Fachbereich 4
Licence (German):License LogoCC BY-ND: Creative-Commons-Lizenz 4.0 International

$Rev: 13581 $