Cross-listing of real estate investment trusts (REITs)

Kim Hin Ho, Kwame Addae-Dapaah and Fang Rui Lina Peck

Journal of Property Investment & Finance, 2017, vol. 35, issue 5, 509-527

Abstract: Purpose - The purpose of this paper is to examine the common stock price reaction and the changes to the risk exposure of the cross-listing for real estate investment trusts (REITs). Design/methodology/approach - The paper adopts the event study methodology to assess the abnormal returns (ARs). Pre- and post-cross-listing changes in the risk exposure for the domestic and foreign markets are examined, via a modified two-factor international asset pricing model. A comparison is made for two broad cross-listings, namely, the depositary receipts and the dual ordinary listings, to examine the impacts from institutional differences. Findings - Cross-listed REITs generally experience positive and significant ARs throughout the event window, implying significant superior returns associated with the cross-listing for REITs. On systematic risks, REITs exhibit significant decline in their domestic marketβcoefficients after the cross-listing. However, the foreign marketβcoefficients do not yield conclusive evidence when compared across the sample. Research limitations/implications - Results are consistent with prudential asset allocation for potential diversification gains from the cross-listing, as the reduction from the domestic market beta is more significant than changes in the foreign market beta. Practical implications - The results and findings should incentivise REIT managers to explore viable cross-listing. Social implications - Such cross-listing for REITs should enhance risk diversification. Originality/value - This is a pioneer study on cross-listing of REITs. It provides a basis for investment decision making, and could provoke further research and discussion.

Keywords: Asia; REITs; Event study methodology; Cross-listing; International asset pricing model; USA and Europe (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jpifpp:jpif-08-2016-0063

DOI: 10.1108/JPIF-08-2016-0063

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