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REIT Operational Efficiency and Shareholder Value

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  • Eli Beracha
  • Zifeng Feng
  • William G. Hardin

Abstract

A real estate investment trust (REIT) is an intermediary that passes its cash flows and income to its shareholders. Hence, the efficiency of a REIT in providing this service should affect shareholder value. Using a sample of U.S. equity REITs from 1995 to 2017, we find a strong positive correlation between REIT value (measured by firm Q, market-to-book equity ratio, and capitalization rate) and lagged operational efficiency measures. The results also show that more efficient REITs are associated with average stock returns that are up to 3.88% higher than less efficient REITs. These results are robust across REIT sectors and common risk factors.

Suggested Citation

  • Eli Beracha & Zifeng Feng & William G. Hardin, 2019. "REIT Operational Efficiency and Shareholder Value," Journal of Real Estate Research, Taylor & Francis Journals, vol. 41(4), pages 513-554, October.
    • Handle: RePEc:taf:rjerxx:v:41:y:2019:i:4:p:513-554
    DOI: 10.22300/0896-5803.41.4.513
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