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The Long-Horizon Performance of REIT Mergers

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  • Robert Campbell
  • Erasmo Giambona
  • C. Sirmans

Abstract

We study long-horizon shareholder returns in a comprehensive sample of Real Estate Investment Trust (REIT) mergers, to test whether or not the anomaly of post-merger underperformance observed in conventional firms applies to the case of REITs. Constructing synthetic benchmark portfolios controlling for firm size and for book-to-market value ratio, we find that 60-month buy-and-hold abnormal returns for REIT acquirers are significantly negative at approximately −10%, supporting the position that REIT merger acquirers underperform non-merging REITs in the long run. We find no evidence to challenge previous studies reporting positive announcement period returns for acquirers when the target is privately held, but we do find evidence that these positive returns do not persist. The long term performance of acquiring REITs is approximately the same whether the target is public or private. Copyright Springer Science+Business Media, LLC 2009

Suggested Citation

  • Robert Campbell & Erasmo Giambona & C. Sirmans, 2009. "The Long-Horizon Performance of REIT Mergers," The Journal of Real Estate Finance and Economics, Springer, vol. 38(2), pages 105-114, February.
    • Handle: RePEc:kap:jrefec:v:38:y:2009:i:2:p:105-114
    DOI: 10.1007/s11146-007-9085-z
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    References listed on IDEAS

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    Cited by:

    1. Ghosh, Chinmoy & Petrova, Milena & Xiao, Yihong, 2012. "Do REITs use cash reserves efficiently? Evidence from corporate acquisitions," Journal of International Money and Finance, Elsevier, vol. 31(7), pages 1953-1970.
    2. Chiuling Lu & Tzujui Mao & Yang-pin Shen, 2015. "Beyond friendly acquisitions: the case of REITs," Review of Quantitative Finance and Accounting, Springer, vol. 44(1), pages 139-159, January.
    3. Sridhar Gogineni & Pawan Jain, 2021. "The Role of Target Termination Fees in REIT Mergers," The Journal of Real Estate Finance and Economics, Springer, vol. 63(1), pages 1-39, July.
    4. Chris Ratcliffe & Bill Dimovski & Monica Keneley & Tom Smith, 2017. "Long-Term post-merger announcement performance. A case study of Australian listed real estate," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(3), pages 855-877, September.
    5. Kiplan Womack, 2012. "Real Estate Mergers: Corporate Control & Shareholder Wealth," The Journal of Real Estate Finance and Economics, Springer, vol. 44(4), pages 446-471, May.
    6. Chris Ratcliffe & Bill Dimovski & Monica Keneley, 2017. "The Performance of REIT Acquirers in the Post-Merger Period," ERES eres2017_43, European Real Estate Society (ERES).

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    More about this item

    Keywords

    Real Estate Investment Trusts; REITs; EREITs; Mergers; Buy-and-hold abnormal returns; BHARs; Post-merger performance; G14; G34;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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