A-Reit price responses to cash rate changes

With the rapid increasing number and assets of A-REITs, there has been an urgent need to study the relationship between the changes of cash rates and the A-REITs returns. This study investigates whether there were relationships between Australian-Real Estate Investment Trusts stock returns and policy interest rate changes in the past decade by using event study with a multivariate regression model. The findings indicate that cash rate changes have no significantly positive or negative influence on the equity A-REIT stock prices. A series of successive cash rate changes do not take a continuous and dramatic effect on the equity A-REIT stock prices in each economic cycle. Moreover, the A-REITs with relatively smaller assets show more significant fluctuation to the changes of cash rates, and the A-REITs owning more than $ 10 billion in capital assets have relatively steady stock prices. Overall, the findings from this research lead to a call for comprehensive research into various areas in order to ascertain the determinants of A-REIT price changes.

An analysis of trading in target stocks before successful takeover announcements

In this paper we examine both informed and contraire trading preceding successful takeover announcements on US target firms from 2001 to 2006. We find that both informed trading and contraire trading exist within the period preceding successful takeover announcements on the stock market, as evident through abnormal returns and trading volumes and on the option market by analyzing only abnormal trading volume. In regard to contraire trading, we investigate possible explanations for its existence. This study finds, through analysis of an unbiased sample of rumored target firms, that deliberate contraire trading appears to be profitable which is likely an explanation for such trading.

The diversification discount and takeovers : some Australian evidence

Purpose – The purpose of this paper is to examine the existence of a diversification discount in the Australian takeover market. A sample of 446 Australian publicly-listed firms involved in the market for corporate control was observed between 2000 and 2007. The authors examined two pre-announcement and four post-announcement periods, predominantly around the immediate event date, but also examined activity out to one year following the announcement.
Design/methodology/approach – An event study, in this case, is used to examine abnormal returns around the announcement of a merger or acquisition. The timeframe this study intends to focus on is the period from announcement date to a time one year down the track which, although some studies may deem it “long-term”, is still a relatively short-term measure of performance.While many variables in acquisitions have been looked at in depth over the years, such as outcome, nature, payment method and size of deal, one area which has had considerably less attention is the area of specialisation and diversification. That is, do focus increasing (or non-diversification) deals have different return patterns relative to focus decreasing (or diversification) deals?
Findings – The overall findings of this paper are fairly mixed, barring a few exceptions, and there does not appear to be a great deal of variation in return patterns based purely on whether the announced acquisition is non-diversifying or diversifying in nature.
Originality/value – The paper is of particular value in Australia. Most of the research of diversification to date has taken place in the USA. Australia is similar to the USA in that it has a well-developed economy based on common law principles and an active equity market, however, the existence of institutional and regulatory differences suggests that US results may not hold in Australia.

REIT mergers and acquisitions : a meta-analysis

Purpose – Mergers and acquisitions in the real estate investment trust (REIT) sector have been studied in distinct periods and locations, often leading to findings which are relevant only for the period and/or location investigated. The purpose of this paper is to examine the merger and acquisition studies in aggregate using meta-analysis so that broader findings of factors influencing the returns by targets and bidders are divulged.

Design/methodology/approach – Using a methodology similar to Veld and Veld-Merkoulova a sample of 15 REIT studies with 35 observations for bidders and 25 observations for targets is analysed. A variety of potential factors influencing the returns for bidders and targets are explored.

Findings – Consistent with prior non-REIT research, the evidence shows targets enjoy positive and significant gains in a merger. There is also evidence that acquirers earn significant wealth when all previous studies are examined in aggregate. Meta-analysis results show targets experience higher wealth gains by accepting cash financed deals, but share total gains when both parties are REITs. Additionally, acquirers enjoy improved abnormal returns when the target is privately listed and the use of scrip and/or a combination of scrip and cash produces higher wealth gains for bidding REITs.

Originality/value – This paper aggregates the merger and acquisition literature of REITs to understand better factors influencing returns made by bidders and targets.

An investigation into the drivers of Australian REIT merger and acquisition announcements

Purpose – The purpose of this paper is to use Australian Real Estate Investment Trust (A-REIT) data to empirically examine potential influencing factors on A-REITs becoming a bidder or a target in the mergers and acquisitions (M&A) area.

Design/methodology/approach – This study uses logistic regression analysis to investigate the odds of publically traded A-REITs being either a bidder or a target as a function of a number of financial and corporate governance variables.

Findings – Prior research in the US REIT M&A area has shown that target size is inversely related to takeover likelihood; in contrast, the authors’ Australian results show that size has a positive impact. Prior research on share price and asset performance has shown that underperformance increases the odds of an entity becoming a target, but this paper’s results further support these findings and provide confirmation of the inefficient management hypothesis. For acquirers it was found that leverage, cash balances, management structure, the level of shares held by related parties and the global financial crisis have an important impact on bidder likelihood.

Practical implications – Given that the literature suggests that investors can earn significant positive abnormal returns by owning targets, but incur significant abnormal losses by owning bidders, at announcement, this study will be useful to fund managers and other investors in A-REITs by investigating the characteristics of those firms that become targets and bidders.

Originality/value – This paper adds to the recent US REIT M&A literature by examining the second biggest REIT market in the world and reporting a number of factors that might influence A-REITs to become targets or bidders.

The Christmas effect-special dividend announcements

This paper examines the Halloween effect in special dividend announcements. We find that firms are more likely to announce special dividends at the end of a year, especially in the months of November and December. There is a Halloween effect in the announcements, but more importantly, there is a Christmas effect in the propensity and abnormal returns of special dividends. This paper provides initial evidence on the Christmas effect of special dividend payments. It links monthly effects in stock returns and corporate events to explain the likelihood of the occurrence of special dividend announcements. The results of this paper shed light on why corporate events are more likely to occur in some periods, but less likely to occur in others.

Long-Term post-merger announcement performance. A case study of Australian listed real estate

This study examines the long-term postmerger performance of Australian Real Estate Investment Trusts (A-REITs). The A-REIT sector is used as a case study being less vulnerable to agency issues due to its regulatory structure (Eichholtz and Kok, 2008; Ratcliffe et al., 2009). Research on conventional firms has shown, on average, shareholders are worse off in the long run (Alexandridis et al., 2012). In contrast, we find that shareholders experience significantly positive abnormal returns, after accounting for the financial crisis. This outcome suggests that when managers are restricted with the use of retained earnings and the type of investment, they may be less susceptible to hubris and/or agency issues.

The role of leverage in cross-border mergers and acquisitions

We examine the relationship between leverage and cross-border mergers and acquisitions. Using a sample of 85,560 cross-border mergers and acquisitions in 57 countries over the period 1990 to 2010, we find that firms with higher leverage are less likely to acquire foreign targets, whereas firms with lower leverage tend to be targets acquired by foreign firms. These effects are more pronounced in Asian countries than North America. Acquisition premium, the likelihood of all-cash offer and the percentage of cash in the acquisition offer decrease with leverage in cross-border mergers and acquisitions. Foreign targets gain positive abnormal returns in the both short run and long run, while acquirers earn positive abnormal returns in the short-run, but negative returns in the long run. We also find that firms adjust their capital structure after the acquisition by issuing more equity if they were overleveraged, or issuing more debt if they were underleveraged before the acquisition. Our results provide international evidence on how leverage affects managerial decision to acquire foreign targets, payment method and acquisition premium in cross-border mergers and acquisitions. This study shows that the interdependent relationship between investment decision and financing decision exists worldwide.

Another January effect—evidence from stock split announcements

This paper examines whether there is a January effect in the propensity and abnormal returns of stock split announcements. It provides primary evidence in the investigation of using monthly effects to explain the patterns of stock splits. The results show that the January effect exists in the likelihood of the occurrence of share splits and in the associated short-term abnormal returns. We also find that another monthly effect—the Halloween effect—exists in stock split announcements. However, the January effect has a much larger and considerably more significant impact on the probability and returns of these announcements. The results of this paper shed light on why we observe patterns in the announcement of corporate events.

Aplicando estratégias simultâneas de momento e valor no mercado brasileiro

A teoria de Finanças Comportamentais surge como uma nova abordagem ao mercado financeiro, argumentando que alguns eventos podem ser mais bem explicados se as restrições da racionalidade do investidor são relaxadas. Conceitos de psicologia e limites à arbitragem são usados para modelar as ineficiências, criando a idéia de ser possível ganhar sistematicamente do mercado. Este trabalho propõe um novo modelo, simplista na sua implementação, para aproveitar os retornos anormais advindos de estratégias de momentum e reversão à média simultaneamente. A idéia de um efeito momentum de longo prazo mais forte que o de curto prazo é introduzida, mas os resultados empíricos mostram que a dinâmica do mercado brasileiro rejeita este conceito. O modelo falha em conseguir retornos positivos e livres de risco.

Retornos anormais em fusões e aquisições: novas evidências do mercado brasileiro

O objetivo dessa dissertação é analisar os retornos anormais de Fusões e Aquisições (F&As) no Brasil e verificar se os mesmos podem ser explicados por características das empresas. Essa pesquisa traz contribuição à literatura de duas formas. Primeiro, analisa o período mais longo em pesquisa de F&As no Brasil (1997 a 2009). Além disso, essa pesquisa analisa o comportamento dos retornos anormais em F&As em diferentes sub-períodos, permitindo avaliar se houve alterações ao longo do tempo. Os resultados indicam que os retornos anormais de ambas as empresas são positivos e estatisticamente significativos, sendo que os da firma adquirida são maiores do que os da adquirente. Os resultados mudam ao longo do tempo. De 1997 a 2004, o retorno anormal das empresas alvo é positivo e o retorno anormal das empresas adquirentes é negativo. Por sua vez, de 2005 e 2009, os retornos anormais de ambas as empresas são positivos. O retorno anormal da empresa alvo é positivamente relacionado ao valor de mercado de ambas as firmas e negativamente relacionado ao Q de Tobin e ROA da empresa adquirente. Além disso, no período mais recente, o retorno anormal das empresas alvo também é positivamente relacionado à alavancagem e ROA das mesmas.

Reação de mercado associada à disponibilidade de informação

O racional teórico das finanças comportamentais se sustenta em dois grandes pilares: limites de arbitragem e irracionalidade dos investidores. Dentre os desvios de racionalidade conhecidos, um foi de particular interesse para este estudo: o viés da disponibilidade. Este viés acontece nas situações em que as pessoas estimam a frequência de uma classe ou a probabilidade de um evento pela facilidade com que instâncias ou ocorrências podem ser lembradas. O advento da internet permitiu a verificação do viés de disponibilidade em larga escala por meio da análise dos dados de buscas realizadas. I.e., se uma determinada ação é mais procurada que outras, podemos inferir que ela está mais disponível na memória coletiva dos investidores. Por outro lado, a literatura das finanças comportamentais tem um braço mais pragmático, que estuda estratégias capazes de fornecer retornos anormais, acima do esperado pela hipótese do mercado eficiente. Para os fins deste estudo, destaca-se o efeito momento, no qual o grupo de ações de melhor resultado nos últimos J meses tende a fornecer melhores resultados pelos próximos K meses. O propósito deste estudo foi verificar a possibilidade de se obter retornos acima dos identificados pelo efeito momento segmentando-se as carteiras de maior e menor viés de disponibilidade. Os resultados obtidos foram positivos e estatisticamente significativos na amostra selecionada. A estratégia cruzada entre efeito momento e disponibilidade produziu, para J=6 e K=6, retornos médios mensais de 2,82% com estatística t de 3,14. Já a estratégia só de efeito momento, para o mesmo período de formação e prazo de manutenção, gerou retornos médios mensais de apenas 1,40% com estatística t de 1,22.

Estudo do comportamento do retorno das ações ao redor da data ex-distribuição de capital no mercado acionário brasileiro

Este estudo procura avaliar o comportamento do retorno das ações ao redor das datas ex-distribuição de capital no mercado acionário brasileiro. A partir da metodologia de estudo de eventos encontramos indícios da existência de um retorno anormal médio ao redor do evento. Constatou-se que o retorno anormal persiste do longo do período de 2000 até o fim de 2010. Adicionalmente verificamos que no caso brasileiro não é possível atribuir ao efeito dos impostos a presença do retorno anormal verificado.

Movimento no preço das ações após a divulgação de lucro no Brasil

Aparentemente existe uma anomalia no mercado de ações, onde é possível prever excessos de retomo das ações baseando-se em dados passados de divulgação de lucro. Este fenômeno é estatisticamente significante e parece não ser um artefato de amostragem ou metodologia, mas de uma ineficiência de mercado. Estudos mostram uma tendência dos excessos de retornos acumulados das ações se movimentarem na direção da surpresa de lucro, e este movimento se estende por meses após a data de divulgação de lucro trimestral. Neste trabalho mostro que este fenômeno ocorre também no Brasil, mesmo utilizando uma amostra com especificidades do mercado brasileiro e utilizando dados de expectativas de lucro de analistas financeiros no lugar de previsão estatística.