UNDERWRITER REPUTATION, MARKET ADJUSTED INITIAL RETURNS AND ABNORMAL RETURNS: EVIDENCE FROM LISTED REITS ON THE JOHANNESBURG STOCK EXCHANGE

Oluwaseun Damilola Ajayi and Omokolade Akinsomi

AfRES from African Real Estate Society (AfRES)

Abstract: The paper examined the relationship between underwriter reputation and performance of secondary equity offerings (SEOs) of listed real estate investment trusts (REITs) on the Johannesburg Stock Exchange (JSE). Daily opening and closing price of 37 listed REITs over the last ten (10) years (2008– 2018) were retrieved from the price section of the I-NET (BFA) McGreggor database. The market-adjusted initial day returns, cumulative abnormal returns were estimated using the event study methodology. Independent variables including the issuing price, SEO size, age of firm and leverage of the sample were controlled and regressed adopting the ordinary least squares (multivariate analysis) to estimate the impact of underwriter reputation on performance of listed REITs SEOs. The Carter-Manaster measure provided a significant measure in the estimation of initial returns. Highly reputed underwriters indicated an increase in performance of REITs (and vice-versa) that had issued SEOs within the study period. By implication, REITs who intend to issue SEOs in the nearest future can leverage on the insights provided in this paper by appointing prestigious investment banks for the purpose of underwriting.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2019-09-01
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Persistent link: https://EconPapers.repec.org/RePEc:afr:wpaper:2019-118

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