Property Investment and Property Development Firm Performance Around IPO and Rights Offerings: UK Evidence
Posted: 17 Oct 1999
Abstract
In contrast to the well documented underperformance of equity issuers, Property Investment firms undertaking IPOs and rights issues have performed indistinguishably from similar non-issuing firms. Property Development companies that issued equity over the same period performed significantly worse than non-issuing firms. The major difference between Property Development and Property Investment firms is that Property Investment firms hold portfolios of real estate assets and thus have more certain prices. The lower pricing uncertainty of Property Investment firms results in normal long-run performance. Tests of the cognitive bias hypothesis provide only weak support of this explanation, while size and book-market effects are unable to account for the performance of Property Investment and Development companies. The findings of underperformance for rights issues suggest hat timing equity issues to take advantage of new shareholders may not be linked to the existence of cognitive bias. Importantly for the international growth in securitised real estate markets no evidence is found suggesting equity issues of securitised real estate firms should be avoided.
JEL Classification: G31, G32, R39
Suggested Citation: Suggested Citation