Cash Flows vs. Earnings in the Valuation of Equity REITs

Graham, Carol M.; Knight, John R.

doi:10.1080/10835547.2000.12089590

Cited by 33 publications

(11 citation statements)

References 4 publications

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“…Table 5 results confirm our suspicion that the coefficients of independent variables are all significant, indicating that the information of NI and FFO explains varying returns of assets. Furthermore, the results of Table 4 and Table 5 are similar to those of Graham and Knight (2000), which show the coefficients are insignificant in the model containing both NI and FFO, and the coefficients are all significant in simple regressions. , is the return of company i on time t, t i NI , is the per share net income of company i on time t, t i FFO , is the per share funds from operations of company i on time t.…”

Section: Panel Data Regressionsupporting

confidence: 60%

“…Skinner suggests that Vincent's study use future realized measures of performance to provide a benchmark for assessing how well current period variables measure firm performance. Graham and Knight (2000) use three alternative market-based accounting research models to examine relative and incremental information content of net income and FFO. Their results are consistent with Gore and Stott (1998) in suggesting that FFO is relatively and incrementally informative in predicting stock returns.…”

Section: Previous Studies On Funds From Operationsmentioning

confidence: 99%

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A Preliminary Analysis for Measuring Operating Performance of Real Estate Investment Trusts in Taiwan: Net Income vs. Operation Funds

Chen

Tsai

Chen³

et al. 2011

CMR

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The National Association of Real Estate Investment Trust (NAREIT) has suggested that Net Income (NI) might not be the best measure of operating performance for income-producing real estate, since depreciation measurement based on historical cost is inappropriate for income-producing real estate. Thus, the NAREIT purposes Funds From Operation (FFO) as a supplemental measure for operating performance of income-producing real estate. In Taiwan, Real Estate Investment Trusts (REITs) are a relatively new type of income-producing real estate investment. Since the data on REITs in Taiwan is not yet sufficient, this work uses hotel, tourism and department store industries, or real estate operating firms (REOCs), as a proxy for a preliminary study of REITs in Taiwan. The empirical results show that using a Contemporary Management Research 272 model incorporating both NI and FFO understates the explanatory power of two variables, since multicollinearity occurs. Therefore, the current study separately estimates the information content of NI and FFO, finding that the explanatory power of NI is higher than that of FFO, though the forecasting ability of FFO is higher than that of NI. But the differences between the explanatory power and forecasting ability of NI and FFO are very small. The results show that NI and FFO are both informative for income-producing real estate in Taiwan.

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Section: Panel Data Regressionsupporting

confidence: 60%

Section: Previous Studies On Funds From Operationsmentioning

confidence: 99%

A Preliminary Analysis for Measuring Operating Performance of Real Estate Investment Trusts in Taiwan: Net Income vs. Operation Funds

Chen

Tsai

Chen³

et al. 2011

CMR

View full text Add to dashboard Cite

show abstract

“…Since its introduction, FFO has become very popular; and is commonly reported by REITs as well as widely followed by REIT analysts (Downs and Güner 2006;Fortin and Tsang 2008). Prior research finds that investors use FFO in addition to net income (e.g., Field, Rangan, and Thiagarajan 1998;Vincent 1999;Graham and Knight 2000) in valuation.…”

Section: The Reit Industrymentioning

confidence: 99%

Real Earnings Management and Dividend Payout Signals: A Study for U.S. Real Estate Investment Trusts

2008

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“…For extended discussions of the relative dominance of FFO as a performance benchmark within REIT markets, see Gore and Stott (), Vincent (), Graham and Knight (), Stunda and Typpo (), and Ben‐Shahar, Sulganik, and Tsang ().…”

mentioning

confidence: 99%

Clawback Provisions in Real Estate Investment Trusts

Cashman

Harrison

Panasian³

2016

J of Financial Research

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Using a sample of 195 unique real estate investment trusts (REITs), we examine factors related to the adoption of clawback provisions within managerial compensation contracts. In general, we find strong and consistent empirical evidence that clawback provision are directly related to firm size, complexity, leverage, growth options, monitoring incentives, and CEO performance incentives. We also find that clawbacks are associated with enhanced market and accounting performance, with stronger performance relations observed for adoption decisions tied directly to regulatory mandates. In sum, we conclude compensation clawback provisions represent a valuerelevant, strategic governance mechanism for REITs.JEL Classification: G00, G30, G34We thank Drew Winters, the editor, and an anonymous referee for valuable comments and suggestions throughout the review process. In addition, we thank Nga Nguyen, Nga Trinh, and Kyle Allen for valuable research assistance. Any remaining errors are, as always, our own. 1 For example, consider a privately informed CEO of a firm that is preparing a capital offering. If the CEO discloses negative information, the offering will be more difficult to complete and/or the cost of capital will increase. But if the CEO conceals this information, the offering is more likely to succeed and lower the firm's shortrun financing costs. However, once the obfuscation is eventually discovered the firm is likely to lose trust, credibility, and goodwill in the marketplace. Ultimately, such actions are likely to hinder or prevent the firm from being able to raise capital on attractive terms (if at all) in the future.

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Cash Flows vs. Earnings in the Valuation of Equity REITs

Cited by 33 publications

References 4 publications

A Preliminary Analysis for Measuring Operating Performance of Real Estate Investment Trusts in Taiwan: Net Income vs. Operation Funds

A Preliminary Analysis for Measuring Operating Performance of Real Estate Investment Trusts in Taiwan: Net Income vs. Operation Funds

Real Earnings Management and Dividend Payout Signals: A Study for U.S. Real Estate Investment Trusts

Clawback Provisions in Real Estate Investment Trusts

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