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Credit risk assessment in real estate investment trusts: A perspective on blockholding and lending networks

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  • Kanno, Masayasu

Abstract

This study assesses the credit risk of Japan's real estate investment trusts (J-REITs) in two related markets during the fiscal years 2008–2017. The first J-REIT market involves blockholders, while the second is a lending market of institutions, i.e., banks and insurers. J-REITs are corporation type of closed-end funds listed on the stock exchange and thus, has corporate credit risk. Consequently, a J-REIT's financial variables and its sponsor have a substantial effect on the J-REIT's credit risk. A sponsor's probability of default is a leading indicator of the J-REIT's default and double default probability acts as a coincident indicator of default. Network analysis indicates that some network centralities are proxies for funding liquidity via blockholding and lending networks. Rather than increases in other centralities, an increase in the degree of lending to a J-REIT explains a decrease in the issued J-REIT's credit risk.

Suggested Citation

  • Kanno, Masayasu, 2020. "Credit risk assessment in real estate investment trusts: A perspective on blockholding and lending networks," International Review of Financial Analysis, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:finana:v:71:y:2020:i:c:s1057521920302003
    DOI: 10.1016/j.irfa.2020.101556
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    5. Baker, H. Kent & Kumar, Satish & Goyal, Kirti & Sharma, Anuj, 2021. "International review of financial analysis: A retrospective evaluation between 1992 and 2020," International Review of Financial Analysis, Elsevier, vol. 78(C).

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    More about this item

    Keywords

    REIT; Sponsor; Credit risk; Double default; Centrality measure;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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