IDEAS home Printed from https://ideas.repec.org/a/spr/jecfin/v29y2005i3p313-320.html
   My bibliography  Save this article

Why do reits engage in open-market repurchases?

Author

Listed:
  • Chuo-Hsuan Lee
  • Chengo Hsieh
  • Xiaofeng Peng

Abstract

We investigate why real estate investment trusts (REITs) still engage in open-market repurchases given the unique 95 percent payout requirement. We provide evidence that the motivations for REITs to repurchase stocks are different from those of unregulated firms found by the existing literature. Instead of using funds from operations, REITs appear to finance stock repurchases by issuing new debt and/or selling assets and investments. Unlike ordinary corporations, REITs stock repurchases are not motivated by cash distribution, capital structure, and undervalued equity. However, REITs are more likely to buy back stocks when employees own a higher level of stock options. Also, we find that REITs are more likely to buy back stocks when they have a higher institutional ownership and/or inside ownership. Copyright Springer 2005

Suggested Citation

  • Chuo-Hsuan Lee & Chengo Hsieh & Xiaofeng Peng, 2005. "Why do reits engage in open-market repurchases?," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 29(3), pages 313-320, September.
    • Handle: RePEc:spr:jecfin:v:29:y:2005:i:3:p:313-320
    DOI: 10.1007/BF02761577
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/BF02761577
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/BF02761577?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    2. Christine Jolls, 1998. "Stock Repurchases and Incentive Compensation," NBER Working Papers 6467, National Bureau of Economic Research, Inc.
    3. Brav, Alon & Graham, John R. & Harvey, Campbell R. & Michaely, Roni, 2005. "Payout policy in the 21st century," Journal of Financial Economics, Elsevier, vol. 77(3), pages 483-527, September.
    4. Jagannathan, Murali & Stephens, Clifford P. & Weisbach, Michael S., 2000. "Financial flexibility and the choice between dividends and stock repurchases," Journal of Financial Economics, Elsevier, vol. 57(3), pages 355-384, September.
    5. Bartov, Eli, 1991. "Open-market stock repurchases as signals for earnings and risk changes," Journal of Accounting and Economics, Elsevier, vol. 14(3), pages 275-294, September.
    6. Laurie Simon Bagwell, 1991. "Share Repurchase and Takeover Deterrence," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 72-88, Spring.
    7. Scott Weisbenner, 2000. "Corporate share repurchases in the 1990s: what role do stock options play?," Finance and Economics Discussion Series 2000-29, Board of Governors of the Federal Reserve System (U.S.).
    8. Dittmar, Amy K, 2000. "Why Do Firms Repurchase Stock?," The Journal of Business, University of Chicago Press, vol. 73(3), pages 331-355, July.
    9. Bens, Daniel A. & Nagar, Venky & Skinner, Douglas J. & Wong, M. H. Franco, 2003. "Employee stock options, EPS dilution, and stock repurchases," Journal of Accounting and Economics, Elsevier, vol. 36(1-3), pages 51-90, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chinmoy Ghosh & Erasmo Giambona & John P. Harding & Özcan Sezer & C.F. Sirmans, 2010. "The Role of Managerial Stock Option Programs in Governance: Evidence from REIT Stock Repurchases," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(1), pages 31-55, March.
    2. Jaehee Gim & SooCheong Jang, 2024. "The determinants of aggressive share buybacks: An empirical examination of U.S. publicly traded restaurant firms," Tourism Economics, , vol. 30(1), pages 132-151, February.
    3. Julia Freybote & Frank Gyamfi-Yeboah & Alan J. Ziobrowski, 2014. "Dispositional joint ventures as REIT financing strategy," Journal of Property Research, Taylor & Francis Journals, vol. 31(2), pages 87-107, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Boudry, Walter I. & Kallberg, Jarl G. & Liu, Crocker H., 2013. "Investment opportunities and share repurchases," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 23-38.
    2. Szládek, Dániel, 2024. "Osztalékfizetés helyett részvény-visszavásárlás?. A részvény-visszavásárlások népszerűségének lehetséges okai [Share repurchases instead of dividend payments?. The evolution of payout policies and ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 154-175.
    3. Xiao, MingFang & Cao, June & Chiang, Yao-Min, 2022. "Kiss the baby for the nurse's sake? - Guaranteeing employees' stock purchase against loss program," International Review of Financial Analysis, Elsevier, vol. 81(C).
    4. Luís Krug Pacheco & Clara Raposo, 2009. "ON the TIMING of INITIAL STOCK REPURCHASES," Working Papers de Gestão (Management Working Papers) 06, Católica Porto Business School, Universidade Católica Portuguesa.
    5. Steven Hegemann & Iuliana Ismailescu, 2017. "The Effect of FASB Statement No. 123R on Stock Repurchases: An Empirical Examination of Management Incentives," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 20(02), pages 1-31, June.
    6. Espahbodi, Reza & Liu, Nan & Westbrook, Amy, 2016. "The effects of the 2006 SEC executive compensation disclosure rules on managerial incentives," Journal of Contemporary Accounting and Economics, Elsevier, vol. 12(3), pages 241-256.
    7. Jian Cao & Yun Cheng & Joanna Golden & Joseph H. Zhang, 2019. "Managerial ability, forecasting quality, and open-market repurchase program completion," Review of Quantitative Finance and Accounting, Springer, vol. 53(3), pages 871-894, October.
    8. Ndayisaba, Gilbert A. & Ahmed, Abdullahi D., 2021. "Demystifying the paradoxical popularity of stock buybacks in a market environment characterised by high stock prices," International Review of Financial Analysis, Elsevier, vol. 78(C).
    9. Jeffrey R. Brown & Nellie Liang & Scott Weisbenner, 2007. "Executive Financial Incentives and Payout Policy: Firm Responses to the 2003 Dividend Tax Cut," Journal of Finance, American Finance Association, vol. 62(4), pages 1935-1965, August.
    10. Bargeron, Leonce & Kulchania, Manoj & Thomas, Shawn, 2011. "Accelerated share repurchases," Journal of Financial Economics, Elsevier, vol. 101(1), pages 69-89, July.
    11. Golbe, Devra L. & Nyman, Ingmar, 2013. "How do share repurchases affect ownership concentration?," Journal of Corporate Finance, Elsevier, vol. 20(C), pages 22-40.
    12. Gerald J. Lobo & Ashok Robin & Kean Wu, 2020. "Share repurchases and accounting conservatism," Review of Quantitative Finance and Accounting, Springer, vol. 54(2), pages 699-733, February.
    13. Rim El Houcine & Adel Boubaker, 2014. "Share Repurchasing and the Policies of Stock-Options," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(1), pages 175-187, January.
    14. Tzu-Yu Liu & Li-Lun Liu & John Francis Diaz, 2016. "Effect of Managerial Overconfidence and Compensation on Share Repurchase: Empirical Evidence from Taiwanese Firms," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 12(1), pages 153-179.
    15. Alquhaif, Abdulsalam & Al-Gamrh, Bakr & Abdul Latif, Rohaida, 2020. "An overview of share buybacks: A descriptive case from Malaysia," Journal of Behavioral and Experimental Finance, Elsevier, vol. 28(C).
    16. Angeliki Drousia & Athanasios Episcopos & George N. Leledakis & Emmanouil G. Pyrgiotakis, 2023. "EU Regulation and open market share repurchases: new evidence," The European Journal of Finance, Taylor & Francis Journals, vol. 29(9), pages 1022-1042, June.
    17. Joanna Golden, 2018. "The Effect of Shareholder Rights and Information Asymmetry on Stock-Option-Related Repurchase Activity," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 21(02), pages 1-41, June.
    18. Johannes A. Skjeltorp & Bernt Arne Ødegaard, 2004. "The ownership structure of repurchasing firms," Working Paper 2004/7, Norges Bank.
    19. Gunnar Bårdsen & Jurgen Doornik & Jan Tore Klovland, 2004. "A European-type wage equation from an American-style labor market: Evidence from a panel of Norwegian manufacturing industries in the 1930s," Working Paper 2004/4, Norges Bank.
    20. Haw, In-Mu & Ho, Simon S.M. & Hu, Bingbing & Zhang, Xu, 2013. "Legal Institutions, Ownership Concentration, and Stock Repurchases Around the World: Signal Mimicking?," The International Journal of Accounting, Elsevier, vol. 48(4), pages 427-458.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jecfin:v:29:y:2005:i:3:p:313-320. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.