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The Performance of Acquisitions in the Real Estate Investment Trust Industry

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  • Olgun Sahin

Abstract

This study examines the performance of acquisitions in the Real Estate Investment Trust (REIT) industry around the acquisition announcement and in the long-run. The results suggest that the acquiring REITs experience statistically significant negative abnormal returns while the target REITs earn statistically significant positive abnormal returns during the three-day period around the announcement. The long-run performance of the acquiring REITs is analyzed using size benchmark portfolios with the buy-and-hold, cumulative average and mean calendar time abnormal returns, as well as the Fama-French Three Factor Model. None of the other methods detect significant abnormal returns in the long-run with the exception of the buy-and-hold abnormal return. Further analysis shows that the long-run positive buy-and-hold abnormal return is consistent with an unexpected decline in cost of equity after acquisitions.

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  • Olgun Sahin, 2005. "The Performance of Acquisitions in the Real Estate Investment Trust Industry," Journal of Real Estate Research, Taylor & Francis Journals, vol. 27(3), pages 321-342, January.
    • Handle: RePEc:taf:rjerxx:v:27:y:2005:i:3:p:321-342
    DOI: 10.1080/10835547.2005.12091161
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