Do retail firms benefit from real estate ownership?

Abstract

In this study, we investigate the role of real estate as a contributor to retailers' corporate wealth. Employing a sample of 556 retail firms and data from 2001-2006, we first estimate and compare five popular stock market performance measures: median return, total risk, systematic risk, Sharpe Index and Jensen abnormal performance return index for the 'composite' and 'business' retail firms across three geographical regions and nine retail segments. Then we investigate if there is a statistically significant linear relationship between the relative property levels and incremental stock market performance measures. Overall, the results indicate that, although higher levels of real estate ownership are associated with better stock market performance, these incremental positive performance benefits are subject to diminishing return to scale. As retail firms do generally hold some form of real estate, these findings are significant for their strategic investment decisions. © 2009 Taylor & Francis.