GROWTH OPPORTUNITIES AND CAPITAL STRUCTURE OF REITS

Abstract

Much of the literature on capital structure on Real Estate Investment Trust concentrates on the US market. As such, this study attempts to embark on the rather unexplored market-Asia Pacific, specifically Australia, Japan, Singapore, HongKong. The study seeks to find the impact of the growth opportunities on the capital structure of REITs. Analysis of data from 124 REITs over these 4 markets has revealed that REITs with more growth opportunities employ less debt. The result on debt maturity, however, is not conclusive. We found this finding as supportive of trade-off theory. REITs, due to their special regulation, are not able to enjoy the benefit of tax deductibility status. Therefore, according to trade-off theory, the benefits of debt financing are not traded off against the costs.