DIFFERENCE BETWEEN REIT MERGER & ACQUISITIONS AND GENERAL CORPORATIONS: AN EMPIRICAL STUDY ON STAKEHOLDER VALUE

Abstract

This dissertation extends corporate finance and real estate literature related to Mergers and Acquisitions by examining 47 REITs in the Australian Real Estate Investment Trust (A-REIT) market from 2000 to 2019 and 42 Corporate in the Australian Stock Exchange (ASX) market in the same period.

While some researchers found that smaller targets are more likely to be acquired due to reduced transaction cost, this study shows that in horizontal mergers and acquisitions, REIT acquirers typically prefer to consider larger sized targets and undervalued firms in a period of merger waves, high economic growth and low cost of capital. The findings are consistent with the control group of corporates takeovers. The second part of this dissertation examines the wealth effects to acquirers following an acquisition announcement financed with 2 different payment method – cash or mixed and established that cash financed takeovers will lead to positive abnormal returns.

This study advances the study of differences between REITs and Corporates in a domestic takeover market thereby opening new possibilities for future researches, regulation improvement and management decision.