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A-REIT bidder returns : an evaluation of public and private targets and method of payment

Ratcliffe, Chris and Dimovski, Bill 2012, A-REIT bidder returns : an evaluation of public and private targets and method of payment, Pacific rim property research journal, vol. 18, no. 4, pp. 355-369.

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Title A-REIT bidder returns : an evaluation of public and private targets and method of payment
Author(s) Ratcliffe, ChrisORCID iD for Ratcliffe, Chris orcid.org/0000-0003-3687-7720
Dimovski, Bill
Journal name Pacific rim property research journal
Volume number 18
Issue number 4
Start page 355
End page 369
Total pages 15
Publisher Pacific Rim Real Estate Society
Place of publication Sydney, N. S. W.
Publication date 2012-12
ISSN 1444-5921
Keyword(s) real estate investment trusts (reits)
A-REITS
mergers
acquisitions
cumulative abnormal returns
Summary This study examines the wealth effects of fifty-six Australian Real Estate Investment Trusts (A-REITS) acquirers around the announcement date of a merger and acquisition over the period of 1996 to 2010. This study extends Ratcliffe et al (2009) by examining mergers and acquisitions of private entity targets as well as public targets and confirms recent US REIT work in this field. Utilising event study methodology we find that bidding A-REITs earn positive and significant cumulative abnormal returns (CARs) of +0.966% around the three-day announcement period [-1, +1]. Analysis also indicates bidding firms earn higher CARs when the acquisition is financed by scrip and/or a combination of scrip and cash. Consistent with prior REIT research, event study results show that A-REIT acquirers earn higher excess returns when the target is private as compared to a public target, +2.834% and +0.457% respectively. Further investigation, employing regression analysis, shows book-to-market ratio has a negative impact on bidding firms CARs, suggesting that investors penalise high book-to-market A-REITs in an M&A due to their higher risk characteristics. We also find that both specialisation by property type and relative size of the bidder compared to the target has a positive and significant influence on bidder excess returns. Finally, our results show support for the method of payment findings in the event study, with method of payment returning a negative and significant impact on the bidder CARs.
Notes Reproduced with the kind permission of the copyright owner.
Language eng
Field of Research 150299 Banking, Finance and Investment not elsewhere classified
Socio Economic Objective 900199 Financial Services not elsewhere classified
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2012, The Authors
Persistent URL http://hdl.handle.net/10536/DRO/DU:30050704

Document type: Journal Article
Collections: School of Accounting, Economics and Finance
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Every reasonable effort has been made to ensure that permission has been obtained for items included in DRO. If you believe that your rights have been infringed by this repository, please contact drosupport@deakin.edu.au.