Author
Demirci, İ., Eichholtz, P., Yönder, Erkan
Publication Date
2020-11
Publication Place
-
Springer
Subject
Cost of debt, Diversification, REIT
Type
Periodical
Language
English
Digital
Yes
Manuscript
No
Library
Özyeğin University
Library Asset ID
0895-5638
Record ID
99b19ff7-dd93-4599-a42b-86117aefe354
Library Location
International Finance
Date
2020-11
Sample Text
This paper investigates whether corporate diversification by property type and by geography reduces the costs of debt capital. It employs asset-level information on the portfolios of U.S. REITs to measure diversification and looks at two of their main sources of debt capital: 1,173 commercial mortgages and 952 bank loans. The paper finds that diversification across different property types does indeed dependably reduce the cost of these different types of debt. The effect is about 7 basis points for bank loans if a firm’s property Herfindahl Index is lowered by one standard deviation and this effect gets stronger for REITs with worse financial health – as measured by the interest coverage ratio. The corresponding effect for commercial mortgages is around 22 basis points for collateral diversification by property type. After the crisis, the salience of the collateral asset increases. For diversification across regions, we do not find a consistent relationship between real asset diversification and loan pricing.
DOI
10.1007/s11146-017-9645-9
Cilt
61
