DO THE LARGEST PUBLIC RETAILERS OWN THE LARGEST REAL ESTATE?

Abstract

This paper aims to investigate the factors which affect retailers’ firm performance, particularly at examining the relationship of retailer size and intensity of property ownership on firm value.

In light that Toys R Us filed for bankruptcy in 2017 and is currently undergoing restructuring, this study is even more important in examining the impact of CRE to the retail industry in the era of rapidly expanding e-commerce retailing.

The first part of the study entails a correlation analysis of financial variables and finds that property can be used as a proxy for retailer size. This established the basis for the second part of the study which employs a multivariate panel regression to determine the financial factors and its direction of influence on firm value measured by Tobin’s Q. The results suggest that generally property is beneficial to firm performance. However, at larger proportions of property ownership, property and leverage appears to negatively affect firm performance of non-Asian retailers.

Thus, this paper hopes to shed some insight to the continuing relevance of holding CRE in the operations and strategies of retailers.