Corporate Real Estate Sale and Leaseback Effect: Empirical Evidence from Europe

28 Pages Posted: 6 May 2005

See all articles by Tomi Grönlund

Tomi Grönlund

Helsinki School of Economics

Antti Louko

Aberdeen Property Investors Nordic Region

Mika Vaihekoski

University of Turku, Turku School of Economics; University of Turku - Turku School of Economics

Date Written: November 24, 2004

Abstract

Corporate real estate disposals have increased in Europe during the past few years. In this research paper, we study market reactions of publicly traded European companies' real estate sale and leaseback announcements. The results are in line with the results of Slovin et al. (1990), Rutherford (1990) and Fisher (2004). We find that the sale and leaseback announcements have on average positive impact to firm's value. The results support Lewis and Schallheim's (1992) arguments that leasing and debt are rather complements that substitutes. Leasing can also be seen as a mechanism for selling tax deductions. We also find that the average increase in firms' value is clearly higher in sale and leaseback deals, which size is large in comparison with the market value of the seller-firm. Sale and leaseback arrangements seem to offer potential tax and efficiency gains. These and the release of hidden reserves can lead to the positive valuation effects found in the study.

Keywords: Real Estate, Event Study, Pecking order, Sale and Leaseback

JEL Classification: G14

Suggested Citation

Grönlund, Tomi and Louko, Antti and Vaihekoski, Mika and Vaihekoski, Mika, Corporate Real Estate Sale and Leaseback Effect: Empirical Evidence from Europe (November 24, 2004). Available at SSRN: https://ssrn.com/abstract=716126 or http://dx.doi.org/10.2139/ssrn.716126

Tomi Grönlund

Helsinki School of Economics ( email )

P.O. Box 21210
Helsinki 00100, 00101
Finland

Antti Louko

Aberdeen Property Investors Nordic Region ( email )

Stockholm
Sweden
+358 50 527 7392 (Phone)

Mika Vaihekoski (Contact Author)

University of Turku, Turku School of Economics ( email )

Turku School of Economics
Dep. of Accounting and Finance
University of Turku, 20014
Finland
+358 2 33351 (Phone)

HOME PAGE: http://users.utu.fi/moovai/

University of Turku - Turku School of Economics ( email )

Turku, 20014
Finland

HOME PAGE: http://users.utu.fi/moovai/

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