The Effects of Tax Reforms on REITs: An International Empirical Study

Xu, Yishuang; Yiu, CY

doi:10.2139/ssrn.1878505

Cited by 3 publications

(4 citation statements)

References 41 publications

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“…The JI of the average return of REITs and the M-REITS index exhibited a positive and significant value of 0.0097 and 0.0083 after the tax reforms which superseded the insignificant negative values before the 2007, 2009 and 2012 tax reforms. This concurs to the study by Xu and Yiu (2010) where the effect from tax changes to REITs excess return were 0.10 percent for REIT Modernization Act of 1999 sand 0.07 percent for REITs Investment Diversification and Empowerment Act of 2007, respectively. On an individual basis, all M-REITs performance measures show improved figures beyond the values observed before the tax reforms.…”

Section: Analysis Of Resultssupporting

confidence: 90%

“…Literature on dividend tax reforms and their impact on REITs performance were rather scarce. Xu and Yiu (2010) examined the impact of tax reforms on 34 REITs from the USA and Australia during from 1971 to 2009. Their result showed that tax reform could affect REITs' return either positively or negatively depending on the tax reform period.…”

Section: Literature Reviewmentioning

confidence: 99%

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Implications of dividend tax reforms on M-REITs performance

Abdullah¹,

Mohd²,

Wong³

2017

JPIF

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Purpose The purpose of this paper is to examine the performance of 19 Malaysian Real Estate Investment Trusts (M-REITs) over the period 1999 to 2014, following the implementation of dividend tax reforms announced in the 2007, 2009 and 2012 budgets. Design/methodology/approach Sharpe index, Treynor index and Jensen α are utilized to compare the performance of M-REITs against a newly developed tax-adjusted value-weighted M-REITs index, equity market, property sector and three month Malaysia Treasury Bills (T-Bills). The calculation of M-REITs returns has been adjusted to take into account the dividend tax reforms which have never been considered in previous studies. Findings Most M-REITs outperform the tax-adjusted value-weighted REITs index, equity market, property sector and three month T-Bills. Property sector performs worst during those periods. Some of the M-REITs have a higher standard deviation than the equity market and the tax-adjusted value-weighted M-REITs index. Most M-REITs have a lower total risk than the property sector. Further analysis shows that before (after) the tax reforms, most M-REITs underperform (outperform) the other sectors. The introduction of the tax reforms benefits both REITs and investors. A significant positive Jensen α for some M-REITs indicates that fund managers are able to time the market or to select undervalued assets. Practical implications Findings of the study would enable investors to evaluate the performance of all REITs in comparison to other financial assets during the period of study for better investment decision making. A more accurate assessment on REITs performance that take into account the tax reforms, is available for investors and fund managers to decide on the investment mix to be included in their portfolio. Moreover, fund managers’ performance can be assessed whether they perform better or worse than the equity market, property sector and three month T-Bills. Originality/value This study contributes to the scant literature on dividend tax reforms and their implication toward REITs performance. It is the first study to thoroughly assess the returns of REITs by taking into account the changes on dividend tax rates announced in the 2007, 2009 and 2012 budgets.

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Section: Analysis Of Resultssupporting

confidence: 90%

Section: Literature Reviewmentioning

confidence: 99%

Implications of dividend tax reforms on M-REITs performance

Abdullah¹,

Mohd²,

Wong³

2017

JPIF

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“…Xu and Yiu (2017) posit that plethora of studies have investigated the impact tax reforms on REITs performance; though there is no consensus in their findings. Empirical study by Xu and Yiu (2017) shows that tax reform has positive effects on the development of REITs and REITs investors" wealth growth.…”

Section: Superior Dividend and Earningsmentioning

confidence: 99%

Assessing the Potential of Real Estate Investment Trust in Financing Real Estate Development Projects

Egbo

Nnamani

Amuta³

2021

IJSMS

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One of the crucial challenges facing real estate development in Nigeria is finance. The informal sources of finance are grossly inadequate, and access to formal finance instruments is difficult. This study aimed at investigating the potential of REIT structure as an option for financing real estate development in Nigeria. The specific objectives of the study were to; evaluate the external factors influencing the performance, future growth and development of N-REITs as it affects funding of real estate development projects; and appraise the future prospects of N-REITs as a viable option in financing real estate development projects. A survey research design was adopted for the study. A sample of 275 stakeholders comprising 221 real estate developers, and 54 senior staff members of Securities and Exchange Commission (SEC), all in Abuja, were conveniently selected for the study. Frequency, percentage, mean, and standard deviation were used to analyse the data. Findings show that equity capital (47.8%), commercial banks (26.2%), and mortgage banks (16.5%) are the major sources of real estate development finance in Nigeria. The key external factors influencing N-REITs performance were strategic property locations (4.43 ± 0.82), tax treatment (4.34 ± 0.78), and political risks (4.10 ± 1.12); while the most important prospects of N-REITs in financing real estate development projects include; increase in supply of real properties (4.1 ± 1.02), portfolio diversification (3.88 ± 1.10), and liquidity in real estate sector (3.69 ± 1.22). The study concludes that, in implementing high level sensitisation, transparency, infrastructure provision and review of regulations guiding REIT’s operation, N-REIT most probably becomes a viable option for financing real estate development.

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“…Since 2001, the inclusion of REITs in the mainstream indices of S&P has also improved the exposure of the REITs market. Later in 2008, the REITs Investment Diversification and Empowerment Act allowed a REIT to own a taxable subsidiary and to provide ancillary services to the customers, enabling REIT to generate higher revenues (Xu and Yiu, 2010). 5.…”

Section: Notesmentioning

confidence: 99%

Time dependent behavior of the Asian and the US REITs around the subprime crisis

Chang

Chou

Fung

2012

Journal of Property Investment &Amp; Finance

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Purpose -The study uses an AR(1)-EGARCH(1,1) model to investigate the pricing behaviors of the real estate investment trusts (REITs) for four countries (Australia, Japan, Taiwan and the USA) before and after the 2007 financial crisis. Design/methodology/approach -The study uses an AR(1)-EGARCH(1,1) model to investigate the pricing behaviors of the REITs. Findings -The results show that after the financial crisis, REITS returns show a stronger linkage to the overall market returns but they are not sensitive to expected interest rate movements, except for the Taiwanese REIT market, which shows a negative and significant reaction to the interest rates. There are stronger asymmetric effects of good and bad news on REIT returns particularly after the post financial crisis for the four REIT markets. Research limitations/implications -An examination of the relationship between REIT and the stock market provides information as how REIT provides an effective device related to the stock portfolio diversification. Practical implications -It would be interesting to see how the Asian REIT markets differ from the US market on return and risk behavior. Originality/value -The 2007 subprime crisis happened because of the decline of the real estate market prices in the USA. It represents a special opportunity to examine the time-dependent behavior of REIT returns in a turbulent market environment.

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The Effects of Tax Reforms on REITs: An International Empirical Study

Cited by 3 publications

References 41 publications

Implications of dividend tax reforms on M-REITs performance

Implications of dividend tax reforms on M-REITs performance

Assessing the Potential of Real Estate Investment Trust in Financing Real Estate Development Projects

Time dependent behavior of the Asian and the US REITs around the subprime crisis

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