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Resource Combination and Security Price Reactions: The Case of Real Estate Joint Ventures

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  • R. Ravichandran
  • J. Sa‐Aadu

Abstract

Joint ventures are a commonplace occurrence in the U.S. economy. In particular, firms undertaking real estate projects frequently use the joint venture as a method of combining resources. This paper examines security price reactions around real estate joint venture announcements. The evidence indicates that significant increases in the values of the participating firms occur within a two‐day announcement period. The changes in values appear to be due principally to the amount of information about the local real estate market possessed by the participating firms, and an information signal about the potential financial viability of the proposed project conveyed by the presence of anchor tenants. While the results are important in their own right, they are also significant in another respect. They seem to confirm the efficiency with which the capital market processes information about the markets for trading real estate claims.

Suggested Citation

  • R. Ravichandran & J. Sa‐Aadu, 1988. "Resource Combination and Security Price Reactions: The Case of Real Estate Joint Ventures," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(2), pages 105-122, June.
    • Handle: RePEc:bla:reesec:v:16:y:1988:i:2:p:105-122
    DOI: 10.1111/1540-6229.00449
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    Cited by:

    1. Fayez A. Elayan, 1993. "The Announcement Effect of Real Estate Joint Ventures on Returns to Stockholders: An Empirical Investigation," Journal of Real Estate Research, American Real Estate Society, vol. 8(1), pages 13-26.
    2. James D. Shilling & Charles H. Wurtzebach, 2015. "The Relative Performance of Private Equity Real Estate Joint Ventures," International Real Estate Review, Global Social Science Institute, vol. 18(2), pages 241-276.
    3. Robert Campbell & Nancy White-Huckins & C. Sirmans, 2006. "Domestic and International Equity REIT Joint Ventures: Structuring Corporate Options," The Journal of Real Estate Finance and Economics, Springer, vol. 32(3), pages 275-288, May.
    4. Sviatoslav A. Moskalev & R. Bruce Swensen, 2007. "Joint ventures around the globe from 1990–2000: Forms, types, industries, countries and ownership patterns," Review of Financial Economics, John Wiley & Sons, vol. 16(1), pages 29-67.
    5. Moskalev, Sviatoslav A. & Swensen, R. Bruce, 2007. "Joint ventures around the globe from 1990-2000: Forms, types, industries, countries and ownership patterns," Review of Financial Economics, Elsevier, vol. 16(1), pages 29-67.
    6. Ling T. He & F.C. Neil Myer & James R. Webb, 1997. "The Wealth Effects of Domestic vs International Joint Ventures: The Case of Real Estate," Journal of Real Estate Research, American Real Estate Society, vol. 13(3), pages 349-358.

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