The Information Content of the 1999 Announcement of Funds from Operations (FFO) Changes for Real Estate Investment Trusts

Eric J. Higgins (), Richard L. Ott () and Robert A. Van Ness ()
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Eric J. Higgins: Associate Professor of Finance, Kansas State University, Manhattan, Kansas 66506
Richard L. Ott: Associate Professor of Accounting, Kansas State University, Manhattan, Kansas 66506
Robert A. Van Ness: Associate Professor of Finance, University of Mississippi, University, Mississippi 38677

Journal of Real Estate Research, 2006, vol. 28, issue 3, pages 241-256

Abstract: This study examines the market response to the 1999 announcement of a change in accounting for Funds from Operations (FFO) for Real Estate Investment Trusts (REITs). This change provides an increase in transparency in the accounting statements of REITs regarding the calculation of FFO. An analysis of this announcement finds that shareholder wealth increases but the significance of that increase is questionable. Additionally, an analysis of the adverse selection component of the bid-ask spread finds weak evidence to support the conjecture that the amount of information asymmetry in REIT prices declines after the announcement of the FFO accounting change.

JEL-codes: L85 (search for similar items in EconPapers)
Date: 2006
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