The Determinants of Reit Cash Holdings

Posted: 16 Jan 2009

See all articles by William G. Hardin

William G. Hardin

Florida International University (FIU) - College of Business Administration

Michael J. Highfield

Mississippi State University - Department of Finance and Economics

Matthew D. Hill

Arkansas State University

G. W. Kelly

University of Southern Mississippi; Mississippi State University - Department of Finance and Economics

Date Written: January 15, 2009

Abstract

The factors influencing the cash holdings of REITs are examined with the view that the REIT industry should yield new information regarding the drivers of corporate cash policy due to their unique operating conditions. The availability of REIT line of credit data also allows us to test the association between cash holdings and line of credit access and use. Data constraints in prior investigations have left this an unresolved empirical question in the cash holdings literature. The baseline results show that REIT cash holdings are inversely related to funds from operations, leverage, and internal advisement and are directly related to the cost of external finance and growth opportunities. Cash holdings are also negatively associated with credit line access and use. The results imply that REIT managers elect to hold little cash to reduce the agency problems of cash flow thereby increasing transparency and reducing the future cost of external capital.

Keywords: REIT, cash, liquidity, cash flow, working capital

JEL Classification: G12, G14, G24

Suggested Citation

Hardin, William G. and Highfield, Michael J. and Hill, Matthew D. and Kelly, Gary Wayne, The Determinants of Reit Cash Holdings (January 15, 2009). Journal of Real Estate Finance and Economics, Vol. 39, No. 1, 2009, Available at SSRN: https://ssrn.com/abstract=1328432

William G. Hardin

Florida International University (FIU) - College of Business Administration ( email )

Miami, FL 33199
United States

Michael J. Highfield

Mississippi State University - Department of Finance and Economics ( email )

Mississippi State, MS 39762
United States

HOME PAGE: http://misweb.cbi.msstate.edu/mhighfield

Matthew D. Hill (Contact Author)

Arkansas State University ( email )

2713 Pawnee
P.O. Box 1750
Jonesboro, AR 72467-115
United States

Gary Wayne Kelly

University of Southern Mississippi ( email )

118 College Drive
#5076
Hattiesburg, MS 39406
United States
601 266 4959 (Phone)
601 266 6110 (Fax)

Mississippi State University - Department of Finance and Economics ( email )

Mississippi State, MS 39762
United States

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