On The Operating Performance of REITs Following Seasoned Equity Offerings: Anomaly Revisited

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We examine the operating performance of equity REITs following seasoned equity offerings from 1990–2007. This study uses a variety of measures of operating cash flow and documents improvements in industry-adjusted operating performance prior to issue and a statistically significant decline in these measures after issuance. The deterioration in operating performance of REITs is similar in magnitude to that found for industrial firms in prior studies. We find evidence of mean reversion in operating performance and timing by issuing firms, and that information asymmetry plays an important role in the results. Notably, in using a longer sample period and a variety of cash flow measures and benchmarks, this study finds evidence that is in contrast to results found in an earlier analysis of REIT operating performance.