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The Determinants of Capital Structure in Real Estate Investment Trusts

Published in Elsevier
2014
Volume: 8
   
Issue: 2
Pages: 119 - 128
Abstract

In this paper, I attempt to explain REITs borrowing behavior. With the absence of tax-deductibility advantage, several non-tax-driven benefits of leverage induce REITs managers to issue debt. Accordingly, I diagnose the relative importance of several non-tax-driven benefits of leverage in deriving the capital structure decisions of REITs. Consistent with the pecking order theory of leverage, REITs with higher existing investment use more debt; REITs with higher profitability issue less debt; and REITs with higher expected investment use less debt. I conclude that REITs managers issue debt mainly to avoid issuing equity and to maximize wealth of existing shareholders.

About the journal
JournalData powered by TypesetThe Global Journal of Finance and Economics
PublisherData powered by TypesetElsevier
Open AccessNo