Liquidity Effects on REIT Market Value: Evidence from 2007-2015 U.S. REIT Market

摘要

This study examines the effects of liquidity factors of equity Real Estate Investment Trusts (REITs) on their market values over 2007-2015 period. Theoretically, liquidity factors, such as cash holdings, operating cash flows, cash dividends, and interest payments should not affect firm’s market value. However, many former studies find that liquidity is actually influential to firm’s value. In our research, the results suggest that cash holdings, cash dividends, and funds from operations (FFO) are positively related to REIT market value, which is consistent with previous empirical studies. Although some studies argue that interest expense contributespositively to the market value, we find that excessive interest and related expense could harm the firm’s value by constraining its liquidity. In addition, we also perform the Chow test and discover that there is significant structural break in the value of liquidity after the financialcrisis. Then we split the panel into crisis period (2007-2010) and post-crisis period (2011-2015). The sub-panel regression results enable us to thoroughly analyze the structural break in liquidity effects.