Trade-offs between Asset Location and Proximity to Home: Evidence from REIT Property Sell-offs

摘要

We examine property sell-offs by real estate investment trusts (REITs) and find that investors respond favorably to sales of properties located close to a sell-off firm's headquarters. The negative relationship between the distance from headquarters and cumulative abnormal returns (CARs) that we document exists only in non-gateway markets, though; there is no such relationship in gateway markets. This finding suggests that the positive effects of selling assets in small markets with high perceived risk and limited growth opportunities dominates the negative effects of the efficiency loss brought about by holding assets far away from home. This is the first study to simultaneously examine the proximity of a firm's underlying assets to its headquarters and the location of individual assets in the context of asset sales. Our results are robust to several measures of proximity (using geographic distance, in miles, between a firm's headquarters and its underlying assets or a nearby dummy for below-median distance), to alternative market classifications, to the inclusion of various fixed effects and controls for geographic concentrations (the Herfindahl index of how close to one another the properties are located) and property performance, and to bargaining power and business cycles.