The Value of Relationships in Real Estate Investment Trusts

Abstract

The value of relationship has been the subject of intensive discussion in recent years. Although many have examined the costs and benefits of relationship, the specific sources of the value of relationship are ambiguous. In this study, we investigate the value of relationship in Real Estate Investment Trusts (REITs). We conduct three separate empirical studies that cover the following aspect of relationship: (a) the insurance value of relationship banking; (b) the value of sponsor backing at the IPO; (c) the value of firm-sponsor business relationship (related party transactions) after the IPO. The major findings of this dissertation are described as follows. The first essay uncover the insurance value of banking relationship in protecting REITs against a credit crisis, although, the protection may not valid for small and risky firms. The second and third essays shed light on the value of close relationship with the IPO sponsors in signaling of firm value during the IPO, and channeling of value-enhancing business transactions to the REIT after the IPO.