Mergers add value to REIT shareholders in the long-term

What is it about?

We observe that Australian REIT shareholders experience increase returns after mergers. The outcome suggests that agency issues are reduced in mergers within the real estate investment trust sector.

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Why is it important?

Comparing our results to prior research on conventional firms suggest that when managers have less restriction in retained earnings and the type of investment, they may be more susceptible to empire building, than the growth maximisation hypothesis (Marris, 1963). More research into the long-term performance of acquirers in Australia is needed. This includes a closer examination of different industries, to identify what further impacts agency issues may have on shareholder wealth.