Please use this identifier to cite or link to this item: https://scholarbank.nus.edu.sg/handle/10635/220036
Title: VALUATION EFFECT OF DEBT ANNOUNCEMENT DURING GLOBAL FINANCIAL CRISIS
Authors: WU HONGZHANG SYDNEY
Keywords: Real Estate
Asia REITs
Debt issue
Debt maturity
Event-study
Issue Date: 1-Jun-2010
Citation: WU HONGZHANG SYDNEY (2010-06-01T09:39:26Z). VALUATION EFFECT OF DEBT ANNOUNCEMENT DURING GLOBAL FINANCIAL CRISIS. ScholarBank@NUS Repository.
Abstract: REITs are non-taxable and therefore does not benefit from a tax shield when using debt. While many hypotheses have been advanced to explain why REITs should or should not use debt, a significant proportion of debt is still evident in most REITs. However, in 2007, global financial crisis brought new fear for REITs which held debt. The tightened credit environments raised fear that REITs would face refinancing problem. This paper focuses on debt issues of REITs during the crisis period. By analyzing 313 debt issues made by REITs listed in Singapore (S-REIT) and Japan (J-REIT) between 2007 and 2009, this paper measures the stock price reaction to these debt issues. Significant result was observed for S-REITs in which long-term debt announcement enhanced share value by 1.31% over three day period. However, results for J-REIT have been mixed. Short-term debt announcements were met with a 0.72% increase in three-day stock price. However, long-term debt announcements were met with insignificant market response. This market seems to favour short-term debt over long-term debt. Cross sectional analysis shows that the offer size had a consistent effect on abnormal returns. Firm size, leverage ratio and the use of debt proceeds for refinancing are also found to have an impact on stock returns in some cases. Interestingly, the relationship between abnormal returns and various firm characteristics varies significantly depending on whether short-term debt or long-term debt was issued.
URI: https://scholarbank.nus.edu.sg/handle/10635/220036
Appears in Collections:Bachelor's Theses

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