Takeovers and the Market for Corporate Control in Japanese REITs

Publisher:
American Real Estate Society
Publication Type:
Journal Article
Citation:
Journal of Real Estate Literature, 2015, 23 (1), pp. 115 - 137
Issue Date:
2015-07-31
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Japanese real estate investment trusts (J-REITs) were established in 2001. They have rapidly grown in number and size and there have been many J-REIT mergers following the Global Financial Crisis (GFC). J-REITs typically have a common ownership that renders most takeovers friendly, therefore the motivation for mergers is likely related to financial hardship. We examine the market response and the post- merger performance of these J-REIT mergers. We find significant abnormal trading volume for both surviving and absorbed J-REITs in the immediate days before the merger. Absorbed J-REITs suffer a significantly negative return in the two days before the merger announcement and there is no observed improvement in the post-merger operating performance. Unlike other mergers in Japan, the merger premium for J-REITs is inversely predictive of post-merger performance.
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