How accurate are A-REIT IPO dividend forecasts?

Dimovski, Bill; Ratcliffe, R. G.; Ratcliffe, Christopher I.; Keneley, Monica; Salzman, Scott

doi:10.1108/jpif-05-2019-0066

Cited by 4 publications

(4 citation statements)

References 21 publications

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“…However, given the importance of information asymmetry in IPO pricing, there are other mechanisms that can reduce the friction such as providing earnings/dividends forecast so investors can make a more informed decision. In their analysis of future dividend forecast issued at IPO for Australian REITs, Dimovski et al (2019) note the forecast accuracy may lead to more certain security price valuation. Ratcliffe et al (2020) document that REITs with dividend forecast disclosure at IPO tend to have improved post-listing performance.…”

Section: Discussionmentioning

confidence: 99%

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Cash flow uncertainty and IPO underpricing: evidence from income guarantee in Thai REITs

Saengchote

Charoenpanich²

2021

JPIF

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PurposeThe purpose of this article is to investigate the relationship between cash flow uncertainty and the underpricing of real estate investment trust (REIT) initial public offerings (IPOs) using hand-collected data on income guarantee in Thailand from January 2005 to December 2019.Design/methodology/approachThis article uses linear regression to determine the relationship between underpricing (initial return) and proxy for cash flow uncertainty (income guarantee), controlling for other factors. Because issuers can use several actions to signal their quality under asymmetric information, the joint decisions are analyzed as simultaneous equations and estimated using three-stage least square (3SLS) to address potential endogeneity concern.FindingsThis article finds that underpricing, on average, is negatively related to income guarantee, which is a proxy for ex ante cash flow uncertainty. The relationship is economically and statistically significant and robust to simultaneous equations estimation. Further investigation shows that REITs with income guarantee tend to have lower systematic risk (measured by CAPM beta) and returns, making the nature of some REITs more debt-like than equity-like.Practical implicationsFor issuers, the result suggests that offering income guarantee (which is more costly for assets with lower quality) can be a useful signal of asset quality to investors and reduce IPO discount. For institutional and retail investors, the results are informative about the risk-return tradeoffs in REIT IPO investment opportunities. Income guarantees makes REIT exposure more fix income-like, so there is a need to consider the credibility of the guarantor as well.Originality/valueThis article is the first to use income guarantee as an ex ante measure of cash flow uncertainty and explicitly investigates its linkage to IPO underpricing. This aspect of uncertainty and IPO underpricing remains little-studied in the academic literature. It also contributes to the growing literature of REIT IPOs in Asia.

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Section: Discussionmentioning

confidence: 99%

“…8. Dimovski et al (2019) note the accuracy of future dividend forecast issued at IPO may lead to more certain security price valuation. The authors study the accuracy of dividend forecasts of Australian REIT IPOs but do not relate the accuracy to underpricing.…”

Section: Notesmentioning

confidence: 99%

Cash flow uncertainty and IPO underpricing: evidence from income guarantee in Thai REITs

Saengchote

Charoenpanich²

2021

JPIF

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“…The initial public offering (IPO) performance of REITs has also been another topic of study (Dimovski et al 2019). The forecasted dividends of A-REITs are considered to be biased by Dimovski et al (2019), which has been attributed to institutional factors during the IPO forecasting process. The absence of institutional support at the outset of an A-REITs' IPO is the reason.…”

Section: The Role Of Reits and Their Relationship With Other Investme...mentioning

confidence: 99%

Analyzing the Relationship between the Features of Direct Real Estate Assets and Their Corresponding Australian—REITs

Zhang

2023

IJFS

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This study investigated the relationship between a sector-specific Australian Real Estate Investment Trust (A-REITs) and the underlying property assets in its property portfolio. The existing studies have assessed the connectedness/correlation between the A-REITs market and a variety of other asset markets, including the overall stock, bond, and direct real estate markets. This study applied regression analysis methods and discovered that there exists a certain degree of linear correlation between the underlying property assets and the return of the subject A-REITs. The most significant variable is the occupancy of the offices. The higher the occupancy is, the better the dividend can be. Features of the A-REITs also affect the dividend outcomes, specifically, the total portfolio market value and the capitalization rate. This suggests that the annual valuation outcomes show a positive relation with the performance of the A-REITs.

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“…Recent examinations, such as by Dimovski et al (2017), highlighted overpricing in post-crisis U.S. REITs from 2010-2015. This cyclical behaviour, transitioning from underpricing to overpricing, underscores the distinct dynamics of REIT markets.…”

Section: Alternative Asset Classesmentioning

confidence: 99%