An Analysis of Gains to US Acquiring REIT Shareholders in Domestic and Cross-Border Mergers before and after the Subprime Mortgage Crisis
This paper examines the abnormal returns of acquiring real estate investment trusts (REITs) around the announcement of acquisitions before and after the subprime mortgage crisis. Based on 182 domestic and cross-border US REIT acquisition announcements from 2005 to 2010, the acquiring trusts experien...
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doaj-9cde995bccc54b8d95be6487b9fda5c92020-11-25T00:56:46ZengMDPI AGSustainability2071-10502018-12-011012458610.3390/su10124586su10124586An Analysis of Gains to US Acquiring REIT Shareholders in Domestic and Cross-Border Mergers before and after the Subprime Mortgage CrisisAlan T. Wang0Yu-Hong Liu1Yu-Chen Chang2Institute of Finance, National Cheng Kung University, Tainan City 70101, TaiwanInstitute of Finance, National Cheng Kung University, Tainan City 70101, TaiwanJP Morgan, 8F No. 108, Sec. 5, Xinyi Road., Xinyi Dist., Taipei City 11047, TaiwanThis paper examines the abnormal returns of acquiring real estate investment trusts (REITs) around the announcement of acquisitions before and after the subprime mortgage crisis. Based on 182 domestic and cross-border US REIT acquisition announcements from 2005 to 2010, the acquiring trusts experienced a 0.73% abnormal return, on average. When the sample was divided into pre-crisis, crisis, and after-crisis subsamples, the acquiring trusts enjoyed the largest abnormal returns (1.86%) for domestic acquisitions during the crisis period. Before the crisis, when the acquisition was cross-border, the target was private, or the transaction was cash-financed, the acquiring trust experienced larger abnormal returns. During the crisis period, the acquiring trust gained larger abnormal returns when the transaction value was larger. After the crisis period, the acquiring trust achieved less abnormal returns in cross-border mergers. For both pre- and after-crisis periods, the shareholders of the acquirer enjoyed larger abnormal returns when the mergers were cash-financed, regardless of whether the target was public or privately held. Neither the blockholder monitoring nor the signaling hypothesis can explain such value gains. The structural changes in the acquirer’s abnormal returns are possibly due to the increased risk aversion of the market participants following the crisis.https://www.mdpi.com/2071-1050/10/12/4586mergersubprime mortgage crisisevent study |
collection |
DOAJ |
language |
English |
format |
Article |
sources |
DOAJ |
author |
Alan T. Wang Yu-Hong Liu Yu-Chen Chang |
spellingShingle |
Alan T. Wang Yu-Hong Liu Yu-Chen Chang An Analysis of Gains to US Acquiring REIT Shareholders in Domestic and Cross-Border Mergers before and after the Subprime Mortgage Crisis Sustainability merger subprime mortgage crisis event study |
author_facet |
Alan T. Wang Yu-Hong Liu Yu-Chen Chang |
author_sort |
Alan T. Wang |
title |
An Analysis of Gains to US Acquiring REIT Shareholders in Domestic and Cross-Border Mergers before and after the Subprime Mortgage Crisis |
title_short |
An Analysis of Gains to US Acquiring REIT Shareholders in Domestic and Cross-Border Mergers before and after the Subprime Mortgage Crisis |
title_full |
An Analysis of Gains to US Acquiring REIT Shareholders in Domestic and Cross-Border Mergers before and after the Subprime Mortgage Crisis |
title_fullStr |
An Analysis of Gains to US Acquiring REIT Shareholders in Domestic and Cross-Border Mergers before and after the Subprime Mortgage Crisis |
title_full_unstemmed |
An Analysis of Gains to US Acquiring REIT Shareholders in Domestic and Cross-Border Mergers before and after the Subprime Mortgage Crisis |
title_sort |
analysis of gains to us acquiring reit shareholders in domestic and cross-border mergers before and after the subprime mortgage crisis |
publisher |
MDPI AG |
series |
Sustainability |
issn |
2071-1050 |
publishDate |
2018-12-01 |
description |
This paper examines the abnormal returns of acquiring real estate investment trusts (REITs) around the announcement of acquisitions before and after the subprime mortgage crisis. Based on 182 domestic and cross-border US REIT acquisition announcements from 2005 to 2010, the acquiring trusts experienced a 0.73% abnormal return, on average. When the sample was divided into pre-crisis, crisis, and after-crisis subsamples, the acquiring trusts enjoyed the largest abnormal returns (1.86%) for domestic acquisitions during the crisis period. Before the crisis, when the acquisition was cross-border, the target was private, or the transaction was cash-financed, the acquiring trust experienced larger abnormal returns. During the crisis period, the acquiring trust gained larger abnormal returns when the transaction value was larger. After the crisis period, the acquiring trust achieved less abnormal returns in cross-border mergers. For both pre- and after-crisis periods, the shareholders of the acquirer enjoyed larger abnormal returns when the mergers were cash-financed, regardless of whether the target was public or privately held. Neither the blockholder monitoring nor the signaling hypothesis can explain such value gains. The structural changes in the acquirer’s abnormal returns are possibly due to the increased risk aversion of the market participants following the crisis. |
topic |
merger subprime mortgage crisis event study |
url |
https://www.mdpi.com/2071-1050/10/12/4586 |
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