The Cost of Financial Flexibility: Information Opacity, Agency Conflicts and REIT at-the-Market (ATM) Equity Offerings

George D. Cashman (), David M. Harrison (), Shelly Howton () and Benjamin Scheick ()
Additional contact information
George D. Cashman: Marquette University, College of Business Administration
David M. Harrison: College of Business Administration, University of Central Florida
Shelly Howton: Villanova University
Benjamin Scheick: Villanova University

The Journal of Real Estate Finance and Economics, 2023, vol. 66, issue 2, No 10, 505-541

Abstract: Abstract Using a sample of publicly traded U.S. REITs, we examine the impact of at-the-market (ATM) equity offerings on participating firms’ cost of capital. While ATM programs can improve a firm’s financial flexibility, capital market access, and market timing capabilities, they also may engender agency conflicts and increase the information opacity of the firm’s operations. Consistent with these adverse effects, we document a positive relation between ATM program availability and the implied cost of equity capital. These core findings are most pronounced for firms that are relatively opaque, thus providing further evidence of an information-based channel for the cost of capital effect.

Keywords: Financial flexibility; At-the-market (ATM) equity offerings; Cost of capital; Agency problems; Informational opacity; G14; G32; G38 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11146-021-09821-9

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