Premium
Asset Growth and Stock Performance: Evidence from REITs
Author(s) -
Ling David C.,
Ooi Joseph T.L.,
Xu Ruoran
Publication year - 2017
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 - 10.1111/1540-6229.12186
Subject(s) - real estate investment trust , equity (law) , stock (firearms) , economics , net asset value , monetary economics , financial economics , growth stock , asset (computer security) , real estate , business , stock market , finance , stock market bubble , mechanical engineering , paleontology , computer security , horse , computer science , law , biology , engineering , political science
In this article, we examine the impact of asset growth rates on the future stock performance of 308 publicly traded real estate investment trusts (REITs). We observe that fast‐growing REITs tend to underperform slow growing REITs. However, we find evidence that the growth effect is significantly less negative for REITs selling at a premium to net asset value. In addition, we observe the asset growth effect only in the subsample of REITs that engages in equity issuance over the next 12 months. The combined evidence suggests contemporaneous equity dilution, which has not been considered in previous studies, may provide an explanation for the underperformance of fast‐growing firms.