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Captive Financing Arrangements and Information Asymmetry: The Case of REITs
Author(s) -
Wei Peihwang,
Hsieh ChengHo,
Sirmans C. F.
Publication year - 1995
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00670
Subject(s) - real estate investment trust , information asymmetry , volatility (finance) , economics , insider , estate , monetary economics , business , financial economics , real estate , finance , political science , law
For the sample period of 1985 and 1986, captive real estate investments trusts (REITs) have a larger bid‐ask spread than noncaptive REITs, after controlling for trading volume, price volatility, insider holdings, institutional holdings and firm size. Based on the bid‐ask spread literature, the results suggest that captive firms are subject to a greater degree of information asymmetry. This implies a higher cost of capital for captive firms. The evidence here and the trend toward self‐administered REITs imply that information asymmetry and conflicts of interests within REITs are priced.