Information Asymmetry and Organizational Structure: Evidence from REITs

Yongheng Deng, Maggie (Rong) Hu () and Anand Srinivasan ()
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Maggie (Rong) Hu: University of New South Wales
Anand Srinivasan: National University of Singapore

The Journal of Real Estate Finance and Economics, 2017, vol. 55, issue 1, No 2, 32-64

Abstract: Abstract We test for the differences in information asymmetry across two organizational forms (external and internal) in the REIT industry. We find significant differences with external REITs being significantly more transparent relative to internal REITs, and these differences are reflected in the loan contract terms and loan syndicate structure of loans made to these two types of REITs. We find that the relatively more transparent externally advised REITs are offered more favourable loan contracts in terms of lower loan rates and lower likelihood of collateral requirement. Further, loans to external REITs have syndicates that are larger in size and the lead lender retains a smaller portion of the loan, reflecting lower information asymmetry.

Keywords: External advisor; Real estate investment trust (REIT); Organizational structure; Loan contract terms; Information opacity; Certification effect (search for similar items in EconPapers)
JEL-codes: G20 L00 L22 L85 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s11146-016-9550-7

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