Geographic Proximity and Competition for Scarce Capital: Evidence from U.S. REITs

Chongyu Wang (), Jeffrey Cohen and John L. Glascock ()
Additional contact information
Chongyu Wang: Concordia University
John L. Glascock: University of Connecticut

International Real Estate Review, 2019, vol. 22, issue 4, 535-570

Abstract: The question of whether REITs compete for scarce capital across geographic space is deserving of attention. In this study, we consider the issue of spatial competition among REITs across U.S. states in terms of the degree of interdependence in financial capital demand. First, we motivate the issue with a theoretical model of cost minimization by using a representative REIT in a given U.S. state and demonstrate that a priori, it is unclear whether the capital demand of a REIT depends on that of the REITs in other states. Then we use spatial econometrics techniques and find empirically that REITs compete for financial capital with REITs in other states. We also find evidence of feedback (or indirect) effects, thus implying amplified crowding out of financial capital when other REITs in nearby states increase financial capital demand. Our findings are aligned with the predation hypothesis, which suggests that REIT managers might exploit the financial distress of neighboring REITs and/or investors as an opportunity to steal their market share. Another key contribution of this study is that we focus on capital liquidity as opposed to stock liquidity.

Keywords: REITs; Financial Capital Scarcity; Geographic Spillovers (search for similar items in EconPapers)
JEL-codes: L85 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.gssinst.org/irer/wp-content/uploads/20 ... r-scarce-capital.pdf Full text (application/pdf)

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:ire:issued:v:22:n:04:2019:p:535-570

Ordering information: This journal article can be ordered from
Global Social Science Institute, 9200 Corporate Blvd., Suite 420 Rockville, MD 20850
https://www.gssinst.org/gssinst/index.html

Access Statistics for this article

International Real Estate Review is currently edited by Professor Sing Tien Foo and Professor Ko Wang

More articles in International Real Estate Review from Global Social Science Institute Global Social Science Institute, 9200 Corporate Blvd., Suite 420 Rockville, MD 20850.
Bibliographic data for series maintained by IRER Graduate Assistant/Webmaster ().