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Positive Performance and Private Equity Placements: Outside Monitoring or Inside Expertise?
Authors: Start Page: 389 Abstract: This paper examines the performance of real estate investment trusts (REITs) making equity private placements. Since REITs are frequent issuers of equity, we can control for the market’s reaction to underinvestment versus monitoring. Like previous studies of REIT public offerings, we find a significant negative abnormal return associated with the announcement of an equity private placement, positive long-run abnormal returns, and improved operating performance. The long-run abnormal returns are not associated with the presence of an external monitor. It does appear, however, that REIT managers are able to time equity issues to correspond with stock market performance and investment opportunities in the real estate market.
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