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The Information Content of the 1999 Announcement of Funds from Operations (FFO) Changes for Real Estate Investment Trusts

Author

Listed:
  • Eric J. Higgins

    (Associate Professor of Finance, Kansas State University, Manhattan, Kansas 66506)

  • Richard L. Ott

    (Associate Professor of Accounting, Kansas State University, Manhattan, Kansas 66506)

  • Robert A. Van Ness

    (Associate Professor of Finance, University of Mississippi, University, Mississippi 38677)

Abstract

This study examines the market response to the 1999 announcement of a change in accounting for Funds from Operations (FFO) for Real Estate Investment Trusts (REITs). This change provides an increase in transparency in the accounting statements of REITs regarding the calculation of FFO. An analysis of this announcement finds that shareholder wealth increases but the significance of that increase is questionable. Additionally, an analysis of the adverse selection component of the bid-ask spread finds weak evidence to support the conjecture that the amount of information asymmetry in REIT prices declines after the announcement of the FFO accounting change.

Suggested Citation

  • Eric J. Higgins & Richard L. Ott & Robert A. Van Ness, 2006. "The Information Content of the 1999 Announcement of Funds from Operations (FFO) Changes for Real Estate Investment Trusts," Journal of Real Estate Research, American Real Estate Society, vol. 28(3), pages 241-256.
    • Handle: RePEc:jre:issued:v:28:n:3:2006:p:241-256
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    References listed on IDEAS

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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. Frank Gyamfi-Yeboah & Alan Ziobrowski & Lisa Lambert, 2012. "Reits’ Price Reaction to Unexpected FFO Announcements," The Journal of Real Estate Finance and Economics, Springer, vol. 45(3), pages 622-644, October.
    3. Masaki Mori, 2015. "Information Diffusion in the U.S. Real Estate Investment Trust Market," The Journal of Real Estate Finance and Economics, Springer, vol. 51(2), pages 190-214, August.

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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