The idiosyncratic characteristics of Turkish REITs: evidence from financial ratios

Abstract

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.

Interdependence between foreigner housing acquisitions and housing price increase in Turkey during the COVID-19 pandemic era

“…This further strengthened the idea that both theories of ownership and justice motivation theory could better explain studies on foreigners' house acquisitions, especially in Turkey, where real estate contributes substantially to economic growth. According to Çelik and Arslanli (2021), real estate is among the top-tier investment vehicles for Turkish economic growth. To the authors' best knowledge, this is the first study that investigates foreigners’ house acquisitions through the lens of the theory of ownership and justice motivation theory simultaneously.…”

“…Furthermore, this finding revealed that both ownership and justice motivation theories are supported and appropriate for this study. In addition, current global economic conditions might have drawn the attention of foreign investors towards Turkey (Çelik and Arslanli, 2021). Furthermore, the response to the shocks is captured in Figure 4.…”

Performance evaluation and volatility of Turkey REITs during COVID-19 pandemic

“…Since 1995, the Turkish REITs have been administered by the Independent Capital Market Board of Turkey, and the board emphasizes the need for transparency. In the end, the first initial public offering (IPO) was issued in 1997 by Istanbul Stock Exchange (BIST) (CBM, 2020; Sumer and Ozorhon, 2020a, b; Çelik and Arslanli, 2021). Turkish REITs are issued at highly discounted market value which increases the need for an extensive understanding of the market (Çelik and Arslanli, 2021).…”

“…In the end, the first initial public offering (IPO) was issued in 1997 by Istanbul Stock Exchange (BIST) (CBM, 2020;Sumer and Ozorhon, 2020a, b;Çelik and Arslanli, 2021). Turkish REITs are issued at highly discounted market value which increases the need for an extensive understanding of the market (Çelik and Arslanli, 2021). Generally, REITs are tax-exempted provided they payout 90% of the earnings as dividends (Feng et al, 2007) while T-REITs are not obliged to payout at least 90% dividend (Akinsomi et al, 2018).…”

“…In addition, Tekin (2021) studied 21 Turkish REITs using quarterly data from 2010: Q1 -2019: Q4 and employed a fixed effect estimator. Çelik and Arslanli (2021) studies 17 Turkish REITs traded on the Istanbul Stock Exchange using data from 2009 to 2018 to conclude the vulnerability and fragility of REITs' financial structure against market volatility. Sumer and Ozorhon (2020a, b) compare investment in Turkish REITs with investment in gold during the COVID-19 pandemic.…”