Property Investment and Property Development Firm Performance Around IPO and Rights Offerings: UK Evidence

Posted: 17 Oct 1999

See all articles by Marcus Gerbich

Marcus Gerbich

City University London - Faculty of Finance

Mario Levis

City University London - Cass Business School

Piers Venmore-Rowland

City University London - Faculty of Finance

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

Gerbich, Marcus and Levis, Mario and Venmore-Rowland, Piers, Property Investment and Property Development Firm Performance Around IPO and Rights Offerings: UK Evidence. The Journal of Real Estate Finance and Economics, Vol. 18, Issue 2, March 1999, Cass Business School Research Paper, Available at SSRN: https://ssrn.com/abstract=181315

Marcus Gerbich

City University London - Faculty of Finance

London, EC2Y 8HB
Great Britain
0171-477-8635 (Phone)
0171-477-8648 (Fax)

Mario Levis (Contact Author)

City University London - Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
4420 70408635 (Phone)

Piers Venmore-Rowland

City University London - Faculty of Finance

London, EC2Y 8HB
Great Britain
0171-477-8635 (Phone)

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