Determinant Factors of Profitability in Malaysia’s Real Estate Investment Trusts (M-REITS)

Jakpar, Shaharudin; Tinggi, Michael; Tak, Akmal Hisham; Ruzlan, Nur Amanina

doi:10.33736/uraf.1209.2018

Cited by 10 publications

(5 citation statements)

References 6 publications

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“…The previously cited studies have focused on the determinant of the REIT's stock market returns, not the REIT's accounting ROE. Jakpar et al (2018) approached the study of the REIT's ROE determinants by modeling the ROE as the dependent variable, and defining as independent variables the dividend yield, the net asset value and also the price-earnings ratio. They found that neither the net asset value nor the price-earnings ratio had a statistically significant relation with ROE.…”

Section: Literature Reviewmentioning

confidence: 99%

Do real estate investment companies profit from house price growth? Evidence from Portugal

Cunha

Borges²,

Ferreira³

2023

IJHMA

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Purpose This study aims to study the sensitivity of nonlisted real estate investment companies’ accounting earnings to house prices. This study evaluates whether house price changes determined these companies’ return on equity (ROE) or if other factors influenced the industry’s profitability beyond house price growth. Design/methodology/approach The authors collected a ten-year sample with the aggregate ROE of Portugal’s real estate investment companies, split by regions, and data on house prices and the per capita gross domestic product as a control variable. The authors ran a national-level time series with the canonical cointegrating regression estimator, which is robust to a small sample size; the authors also performed a regression on regional-level panel data with the common correlated effects mean group estimator, thus allowing slope coefficient heterogeneity and controlling for cross-sectional dependence. The authors also ran ordinary least squares regressions as a means of comparison. Findings This study found that an increase in the house price is not translated into an increase in the aggregate ROE. The results are robust with a reduced survivorship-biased sample, meaning that even the best-succeeded real estate investment companies do not have their accounting ROE dependent on house price growth. Research limitations/implications The sample size is small and specific to one country. This paper did not study the housing market structure to verify whether it operates under monopolistic competition, which could further explain the attained results. Practical implications Policy decision-makers should know that there are no excess profits in the real estate investment companies’ industry because of house price growth that could be subject to windfall taxes. Originality/value To the best of the authors’ knowledge, the connections between house prices and real estate investment companies’ accounting earnings have never been studied.

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Section: Literature Reviewmentioning

confidence: 99%

Do real estate investment companies profit from house price growth? Evidence from Portugal

Cunha

Borges²,

Ferreira³

2023

IJHMA

View full text Add to dashboard Cite

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“…ROA and current ratio have a positive relationship with firm value, while acid test ratio has a negative relationship. Jakpar et al (2018) determine that the most critical factor that affects the ROA of REIT companies in Malaysia is the stock return (positive). Ma'in et al (2018) examine the effect of macroeconomic factors and firm characteristics, including inflation and interest rate, gross domestic product (GDP), dividend yield and market capitalization, on the performance of REITs.…”

Section: Literature Reviewmentioning

confidence: 99%

The Factors Affecting the Market Value/Book Value and Profitability of REITs in Turkey

Tekin¹

2021

IRER

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Increasing income level and the desire to live a more comfortable life in countries with an increasing population are constantly driving the demand for real estate. Real estate investment trusts (REITs) are capital market institutions that can invest in real estate, real estate-based capital market instruments, real estate projects, real estate-based rights and capital market instruments. In addition, they establish partnerships to realize specific projects, engage in other permitted activities, and are organized by the Capital Market Law in Turkey. In this study, the fixed effects panel data regression model is used to determine the financial indicators that affect the market value and profitability of the Turkey REITs that are traded in the Borsa İstanbul REITs Index. The study covers 21 REIT companies. The data set is in the period between 2010:Q1 to 2019:Q4 in the analyses. The results show that return on assets (ROA), return on equity (ROE), asset turnover, leverage, equity multiplier and current asset turnover are effective on the market to book ratio (MBR). The ratios that affect the ROA are MBR, ROE, acid-test, leverage, equity multiplier, EBITDA/sales and current asset turnover. Moreover, the ratios that affect the ROE are the ROA, MBR, acid-test, asset turnover, leverage, and equity multiplier.

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“…However, return on equity and return on assets ratios realized positive on average. Jakpar et al (2018) apply panel data analysis to determine factors that affect REITs' return on equity of Malaysia. Eight REITs included in the research and period is from 2008 to 2015.…”

Section: Market Value Book Value 100mentioning

confidence: 99%

The idiosyncratic characteristics of Turkish REITs: evidence from financial ratios

Çelik

Arslanlı

2021

JERER

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PurposeThis paper aims to determine the specific financial ratio's effects on market value and return of assets for Turkish real estate investment trusts (REITs) traded at Istanbul Stock Exchange (ISE). The paper intends to define liquidity ratios, financial structure ratios, return ratios and stock performance ratios related to market value and return of asset.Design/methodology/approachThe study includes 17 REITs traded in ISE. The period of study is specified as the year from 2009 to 2018. Panel data analysis is applied in this study. Dependent variables are current market value and return of assets, independent variables are 12 financial ratios, which are considered to explain the model significantly. These ratios will be calculated from audited year-end balance sheets for specific periods throughout at least ten years as time series. Two different models and hypotheses have been established to identify the financial ratios that affect the market value and return of assets for REITs.FindingsAccording to the results, long-term financial loans/total assets, return of equity and working capital ratio are negatively correlated with market value, while market value/book value and total assets are correlated positively. On the other hand, market value/book value ratio, price/earning ratio, long-term financial loans/total assets and earnings per share are correlated with return of assets. REITs have high levels of financial leverage, especially in foreign currency. The striking point is that REITs hardly ever do not use financial derivatives to hedge their position again currency and interest rate risk. This approach makes the financial structures of REITs vulnerable and fragile against market volatility.Originality/valueIn Turkey, as an example of an emerging market, financial borrowing does not increase the return rates and market value for REITs due to market's idiosyncratic properties. This finding provides substantial insight into how the debt and equity allocation of Turkish REITs should be structured. Also, it has been observed that forward-looking expectations are considered more than the current situation in the market.

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Determinant Factors of Profitability in Malaysia’s Real Estate Investment Trusts (M-REITS)

Cited by 10 publications

References 6 publications

Do real estate investment companies profit from house price growth? Evidence from Portugal

Do real estate investment companies profit from house price growth? Evidence from Portugal

The Factors Affecting the Market Value/Book Value and Profitability of REITs in Turkey

The idiosyncratic characteristics of Turkish REITs: evidence from financial ratios

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