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Anomalous Evidence on Operating Performance Following Seasoned Equity Offerings: The Case of REITs

Author

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  • H. Swint Friday
  • Shawn D. Howton
  • Shelly W. Howton

Abstract

We examine the operating performance of 200 equity real estate investment trusts (REITs) following seasoned equity offerings (SEO) made between 1990 and 1996. Our sample shows flat to increasing levels of operating performance changes prior to the SEO; and increasing raw performance changes and flat industry-adjusted performance changes following the SEO. Cross-sectional test results on the operating performance changes are consistent with existing theory. Our results contrast with industrial firm results, where performance changes are negative following an SEO. We attribute this difference to structural differences in REITs that limit the levels of internal capital available to REIT managers.

Suggested Citation

  • H. Swint Friday & Shawn D. Howton & Shelly W. Howton, 2000. "Anomalous Evidence on Operating Performance Following Seasoned Equity Offerings: The Case of REITs," Financial Management, Financial Management Association, vol. 29(2), Summer.
    • Handle: RePEc:fma:fmanag:friday00
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    Cited by:

    1. Daniel Broxterman & Tingyu Zhou, 2023. "Information Frictions in Real Estate Markets: Recent Evidence and Issues," The Journal of Real Estate Finance and Economics, Springer, vol. 66(2), pages 203-298, February.
    2. Lin, Chinho & Chang, Chia-Chi, 2015. "The effect of technological diversification on organizational performance: An empirical study of S&P 500 manufacturing firms," Technological Forecasting and Social Change, Elsevier, vol. 90(PB), pages 575-586.
    3. Chinmoy Ghosh & Scott Roark & C. Sirmans, 2013. "On The Operating Performance of REITs Following Seasoned Equity Offerings: Anomaly Revisited," The Journal of Real Estate Finance and Economics, Springer, vol. 46(4), pages 633-663, May.
    4. Jianfu Shen, 2021. "Distress Risk and Stock Returns on Equity REITs," The Journal of Real Estate Finance and Economics, Springer, vol. 62(3), pages 455-480, April.
    5. Chuan‐San Wang & Norman Strong & Samuel Tung & Steve Lin, 2009. "Share Repurchases, the Clustering Problem, and the Free Cash Flow Hypothesis," Financial Management, Financial Management Association International, vol. 38(3), pages 487-505, September.
    6. Joseph F. Brazel & Elizabeth Webb, 2006. "CEO compensation and the seasoned equity offering decision," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(5), pages 363-378.

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