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Title: Maximization of shareholders’ value from J-REITs acquisition: A Keiretsu perspective
Keywords: Real Estate
Masaki Mori
2014/2015 RE
Issue Date: 8-Jun-2015
Citation: SUZUKI YUKI (2015-06-08). Maximization of shareholders’ value from J-REITs acquisition: A Keiretsu perspective. ScholarBank@NUS Repository.
Abstract: The purpose of this study is to understand wealth effects that arise from different acquisition behaviours of J-REITs and evaluate whether related party transactions (RPT), specifically acquisitions from Keiretsu sponsors, maximize shareholders’ value. It provides a better understanding by differentiating the wealth effects between the two different groups of J-REITs. A standard market model event study was conducted over the period of January 2003 till April 2014 to examine the wealth effects of J-REITs acquisitions. Thereafter, a multivariate regression model is used to determine the sources of wealth creation from J-REITs acquisitions. The empirical findings reveal that regardless of acquisition nature, both overpaid and underpaid acquisitions have enhanced value for J-REITs’ shareholders. Contrary to initial prediction that overpayment results in conflicts of interest; an interesting takeaway would be that managerial motive is believed to be synergistic, as long as it is within the investors’ threshold of maximum premium allowable, it is favoured by the stock market. Other findings revealed that RPT acquisitions mostly maximize value for overpaid acquisitions, but underpaid RPT acquisitions are detrimental to shareholder value for underpaid acquisitions due to investors’ apprehension of the quality of acquired property. Interestingly, Keiretsu acquisitions denoted the highest wealth extraction at +6.47% during the nine-day event window (-5,3). The multivariate regression models reaffirmed the aforementioned empirical findings and proved that the main source of value creation for J-REITs acquisition derived from Keiretsu transactions. Keiretsu firms focus their investment decisions on long-term shareholders, and since investors invest in J-REITs for a steady stream of long-term income, the alignment of interest in maximizing shareholders’ value for Keiretsu sponsor and REIT is high.
Appears in Collections:Bachelor's Theses

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