Debt Diversification in Public Real Estate Companies

Alexey Zhukovskiy, Heidi Falkenbach and Ranoua Bouchouicha

ERES from European Real Estate Society (ERES)

Abstract: Following the tradition in general finance literature, research on public real estate companies’ capital structure has focused on testing whether established capital structure theories (i.e. the trade-off theory, the pecking order theory, and the market timing theory) can explain the observed leverage ratios and their variation. However, due to ignoring the heterogeneity of leverage, the reported results are mixed Recent financial literature on industrial firms suggests that in addition to the level ratios, the type of debt is also of significance. In this paper, we analyse the debt structures and level of debt diversification in the Public Real Estate Companies as well as their impacts on company performance. We study the degree of debt diversification across different subsamples of Public Real Estate Companies, i.e. whether they tend to borrow with one type of debt or they choose to diversify across multiple sources. Further, we investigate the persistence of such diversification and look at the phenomena through the prism of capital structure theories, in particular, by addressing the question of how Public Real Estate Companies’ choice of debt type varies with firm characteristics. Finally, we investigate the implications of debt diversification for the cost of capital and growth.

Keywords: Capital Structure; debt diversification; Public real estate investment; Real Estate Finance (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2017-07-01
New Economics Papers: this item is included in nep-cfn and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:eres2017_300

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