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Institutional Ownership Volatility and Investment Behavior of REITs

Author

Listed:
  • Viktoriya Lantushenko

    (Saint Joseph’s University)

  • Edward Nelling

    (Drexel University)

Abstract

We find that the volatility of institutional ownership affects the investment behavior of real estate investment trust (REIT) managers. REITs exhibit stronger growth in real estate assets when they experience more volatility in institutional ownership. Debt is the likely source of financing these investments, whereas institutional ownership volatility does not explain for the equity issuance decisions of REITs. The effect of ownership dynamics on the investment decisions of REITs is mostly driven by institutions that hold highly diversified portfolios, which are classified as quasi-indexers and transient investors. The contribution of ownership volatility emerging from individual trading decisions of institutional stakeholders matters more than the ownership volatility of the institutional sector as a whole. Our findings suggest that REITs may cater their portfolios to the preferences of certain institutional investors.

Suggested Citation

  • Viktoriya Lantushenko & Edward Nelling, 2022. "Institutional Ownership Volatility and Investment Behavior of REITs," International Real Estate Review, Global Social Science Institute, vol. 25(2), pages 161-198.
    • Handle: RePEc:ire:issued:v:25:n:02:2022:p:161-198
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    References listed on IDEAS

    as
    1. Chinmoy Ghosh & C. Sirmans, 2006. "Do Managerial Motives Impact Dividend Decisions in REITs?," The Journal of Real Estate Finance and Economics, Springer, vol. 32(3), pages 327-355, May.
    2. Brad Case & William G. Hardin III & Zhonghua Wu, 2012. "REIT Dividend Policies and Dividend Announcement Effects During the 2008–2009 Liquidity Crisis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 40(3), pages 387-421, September.
    3. Ghosh, Chinmoy & Sirmans, C F, 2003. "Board Independence, Ownership Structure and Performance: Evidence from Real Estate Investment Trusts," The Journal of Real Estate Finance and Economics, Springer, vol. 26(2-3), pages 287-318, March-May.
    4. Ağca, Şenay & Mozumdar, Abon, 2017. "Investment–Cash Flow Sensitivity: Fact or Fiction?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 52(3), pages 1111-1141, June.
    Full references (including those not matched with items on IDEAS)

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