Please use this identifier to cite or link to this item: https://scholarbank.nus.edu.sg/handle/10635/223750
Title: IMPACT OF THE FINANCIAL CRISIS ON REIT NAV DISCOUNTS : THE EFFECTS OF LEVERAGE AND REFINANCING RISK
Authors: LAI JUNJIA VANCE
Keywords: Real Estate
Ong Seow Eng
2010/2011 RE
Financial crisis
Leverage
NAV
Price
Refinancing risk
REITs
Issue Date: 12-Nov-2010
Citation: LAI JUNJIA VANCE (2010-11-12). IMPACT OF THE FINANCIAL CRISIS ON REIT NAV DISCOUNTS : THE EFFECTS OF LEVERAGE AND REFINANCING RISK. ScholarBank@NUS Repository.
Abstract: This study investigates the impact of leverage and refinancing risk on REIT Price over NAV (P/NAV) before, during and after the 2007 financial crisis. This is done by examining quarterly data from US equity REITs between 2004 Q1 and 2010 Q2 using quarterly cross-sectional regressions and time-phased and full-period panel regressions. The motivation of this study is driven by the financial crisis which highlighted the negative effects of leverage and the refinancing difficulties faced by REITs during a credit crunch. The quarterly cross-sectional regressions revealed that leverage has a persistently negative impact on REIT P/NAV throughout the study period. However, the cross-sectional regressions could not detect the impact of refinancing risk on P/NAV. The other variables were also found to be inconsistent in explaining P/NAV. Further investigation is done through panel regressions which provide better estimators, as they utilize more observations per regression. In the time-phased panel regression, the sample data is split into three according to the time phases before, during and after the crisis. The regression results again showed that leverage has been negatively related with P/NAV throughout the study period. The results also showed that refinancing risk is insignificant in explaining P/NAV before the crisis. During and after the crisis, refinancing risk has a negative impact on P/NAV. In the full-period panel regression, multiplicative dummies were used to test for changes in the impact of leverage on P/NAV during the different time phases. It is found that the impact of leverage on P/NAV was accentuated during the crisis. After the crisis, the impact of leverage settled back to levels before the financial crisis.
URI: https://scholarbank.nus.edu.sg/handle/10635/223750
Appears in Collections:Bachelor's Theses

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