The Effect of Access to the Public Debt Market on Corporate Financing Decisions: The Case of REITs

Jianfu Shen and Kwong Wing Chau
Additional contact information
Jianfu Shen: Department of Building and Real Estate, The Hong Kong Polytechnic University, Hong Kong, China
Kwong Wing Chau: Ronald Coase Centre for Property Rights Research, HKUrbanLabs, The University of Hong Kong, Hong Kong, China

Sustainability, 2022, vol. 14, issue 13, 1-19

Abstract: We examined the effects of access to public debt on the corporate financing decisions in real estate investment trusts (REITs) using a difference-in-differences approach and a propensity score approach. The introduction of credit ratings by S&P and Moody’s has allowed REITs to access the public debt market. To investigate the impacts of the introduction of credit ratings, we compared the financing policies in REITs with initial credit ratings before and after the introduction of credit ratings with REITs that had not obtained a credit rating between 1980 and 2016. After obtaining credit ratings, REITs have significantly increased the corporate leverage ratios and the use of long term debt, which suggest that REITs were constrained from debt financing, in particular long term debt financing, in the past until they could gain access to the public debt market after the introduction of credit ratings. Access to the public debt market has also significantly reduced both equity issuances and cash holdings. Our empirical results suggest that the introduction of credit ratings can reduce information asymmetry, and affect REITs’ capital structure decisions and the level of cash holdings.

Keywords: credit rating; corporate leverage; debt maturity; equity financing; cash holdings (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/14/13/8008/pdf (application/pdf)
https://www.mdpi.com/2071-1050/14/13/8008/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:14:y:2022:i:13:p:8008-:d:853216

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().