How Does the Market for Corporate Control Function for Property Companies?

Piet M. A. Eichholtz · Nils Kok

53 citations0/0 files storedThe Journal of Real Estate Finance and Economics

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Corporate Finance and Governance Financial Markets and Investment Strategies Merger and Competition Analysis

Abstract

We investigate 95 takeovers of property companies all over the world and find that only two of those are hostile. To determine the effectiveness of the market for corporate control, we first study characteristics of targets and acquirers compared to a control sample, using the complete global universe of listed property companies during the most recent takeover wave (1999–2004). We find that the inefficient management hypothesis holds for both REITs and non-REITs, as targets exhibit significant underperformance before takeovers. In the second part of this study, we investigate shareholder wealth effects following takeovers and confirm previous findings that abnormal returns for targets and bidders are distinctly different for the real estate sector. Moreover, we show that this difference not only holds for REIT-to-REIT mergers, but also for mergers of real estate firms without a REIT-status.

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1983Separation of Ownership and Control 1984Corporate financing and investment decisions when firms have information that investors do not have 1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1996Agency costs of free cash flow, corporate finance, and takeovers 1986Large Shareholders and Corporate Control 1988Management ownership and market valuation 1985Using daily stock returns 1983The market for corporate control

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