Geographic Scope and Real Estate Firm Performance during the COVID-19 Pandemic

Xiaoling Chu, Chiuling Lu and Desmond Tsang
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Xiaoling Chu: Department of Real Estate & Construction, University of Hong Kong, Hong Kong, China
Chiuling Lu: School of Management, National Taiwan University, Taipei 10617, Taiwan
Desmond Tsang: Desautels Faculty of Management, McGill University, Montreal, QC H3A 1G5, Canada

JRFM, 2021, vol. 14, issue 7, 1-16

Abstract: This study examines the effect of geographic scope in mitigating the adverse impact of the COVID-19 pandemic in the real estate sector. Utilizing the Chinese setting over the two-month period in 2020 from the beginning of the outbreak to the successful containment of the spread of virus, we show that while the pandemic has negatively impacted real estate firm returns, firms with broader geographic scope and more geographically diversified property allocations have managed to better endure the crisis. We further find that firms with higher leverage report lower returns during the pandemic irrespective of their geographic scope, but larger firms can lessen the adverse impact of the pandemic only if they have adopted a more diversified strategy. Overall, our study provides novel evidence on the benefit of diversification by demonstrating the importance of geographic scope and diversification at times of crises. Specifically, we show corporate diversification could be especially useful to mitigate the negative stock market reactions resulting from the pandemic. Moreover, diversification could even become essential for larger firms that are expected by the market to be more diversified.

Keywords: geographic scope; diversification; real estate; firm performance; COVID-19; China (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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