DO SPONSORS GAIN FROM REIT IPOS? EVIDENCE FROM ASIAN REITS

Abstract

With the immense growth and unique characteristics of the Asian Real Estate Investment Trusts (REITs), this study aims to look deeper into REIT initial public offerings (IPOs), and evaluate whether an IPO benefits all stakeholders equally. This would allow for greater transparency and to provide a better understanding of the relationships between a REIT and the sponsor. For this study, an analysis of cumulative abnormal returns (CAR) on parent companies (PCs) surrounding the IPO date, as well as comparisons of the financial performance and metrics of PCs one year before and after IPO were undertaken, alongside various robustness tests based on country and sector of the REIT. Via this study, there exists a negative spill over effect on CAR for PCs surrounding IPO date, signifying that an IPO benefits shareholders of REITs more than PCs. As for financial performance and metrics, PCs benefit from lower levels of fixed asset after IPO, resulting in a lightened balance sheet. Regarding other financial metrics such as return on asset (ROA), return on equity (ROE), gearing and revenue per asset, the findings collectively are non-conclusive, possibly owing to the different market conditions and investor sentiments in each country.