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Article
Why do reits engage in open-market repurchases?
Journal of Economics and Finance (2005)
  • Chuo-Hsuan Lee
  • Chengho Hsieh
  • Xiaofeng Peng
Abstract
We investigate why real estate investment trusts (REITs) still engage in open-market repurchases given the unique 95 percent payout requirement. We provide evidence that the motivations for REITs to repurchase stocks are different from those of unregulated firms found by the existing literature. Instead of using funds from operations, REITs appear to finance stock repurchases by issuing new debt and/or selling assets and investments. Unlike ordinary corporations, REITs stock repurchases are not motivated by cash distribution, capital structure, and undervalued equity. However, REITs are more likely to buy back stocks when employees own a higher level of stock options. Also, we find that REITs are more likely to buy back stocks when they have a higher institutional ownership and/or inside ownership.
Disciplines
Publication Date
September, 2005
Citation Information
Chuo-Hsuan Lee, Chengho Hsieh and Xiaofeng Peng. "Why do reits engage in open-market repurchases?" Journal of Economics and Finance Vol. 29 Iss. 3 (2005)
Available at: http://works.bepress.com/chuo-hsuan_lee/11/