房地产投资信托的资金结构外文翻译已处理.docx

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房地产投资信托的资金结构外文翻译已处理

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房地产投资信托的资金结构外文翻译

本科毕业论文（设计）

外文翻译

原文:

OntheCapitalStructureofRealEstateInvestmentTrusts

Ingeneral,thereceivedtheoryoncapitalstructurecanbecategorizedintotwobroadclasses,oneofoptimizationwheremanagerstradeoffthecostsagainstthebenefitsofdebt,andtheotherbehavioralwheremanagerialdecisionmakingisinfluencedbymarket’sperceptionofmanagers’superiorinformation,andtheoverallconditionofthemarketwhichmayoccasionallypresentwindowsofopportunitytosellsecuritiesatapremiumOptimizationoftheCostsandBenefitsofDebt?

TradeoffTheory

Tradeofftheorypositsthatatargetdebtratioexistswhichisdeterminedbythetradeoffbetweenthecostsandbenefitsofdebt,withthefirm’sassetsandinvestmentplansheldconstant.Themostsignificantbenefitofdebtfinancingistheinteresttaxshield.Mandatoryinterestpaymentalsoreducesfreecashflowwhichmitigatestheagencyconflictbetweensecurity-holdersandmanagers.Sinceprofitablefirmshavehigherincometoshield,andgreaterfreecashflow,

theorypredictshigherleverageforprofitablefirms,andtheoppositeforfirmswithinvestmentopportunitiesthatareperceivedtoberisky.Thecostoffinancialdistressisthemajordetrimentofdebt.Factorsthatmitigatebankruptcyriskincludefirm’saccesstofixedassetsascollateral,andgreaterprofitpotential.Forexample,highlow-growthfirmsthataremoresensitivetofluctuationsinbusinessoutlookandarethereforemorevulnerableduetothecostsoffinancialdistress,chooselowerhigherleverageratio.SmithandWatts1992andBarclay,Morella,andSmith2003reportevidenceconsistentwiththisnotion.TitmanandWessel1988findthatdebtratioisnegativelyrelatedtothe‘uniqueness’ofafirm’slineofbusiness,andRajanandZingales1995findthatfirmsizeispositivelycorrelatedwithleverageandprofitabilityisnegativelycorrelatedwithleverageinallcountriesexceptGermany.

Undertradeofftheory,deviationsfromtargetcapitalstructureareonlytemporary.Firmsmakefinancingchoicestorebalancedebtratiotothelong-termoptimumwhichimpliesthatnosystematicrelationexitsbetweenleverageandinvestmentopportunitiesBehavioralTheories?

PeckingOrderandMarketTiming

DevelopedbyMyers1984andMyersandMajluf1984,thepeckingordermodelarguesthatmanagershaveprivilegedinformationaboutfirmvaluethatinvestorsdo84Z.Fengetal.nothave.Becausemanagerscan

exploitthisadvantagetosellequitywhenitisovervalued,newshareholdersavoidordiscountequity,whichimpliesthatonlyinferiorfirmshavetheincentivetosellequity.Theadverseselectioncostisthemainmotivationforissuingthesafestsecurityfirst.Assuch,firmsuseretainedearnings,debtandequity,inthatorder.Hence,highgrowthfirmsthatneedmoreexternalcapitalarepredictedtohavehighleverageratio.Adynamicversionofpeckingordertheory,incontrast,predictsthat,holdingprofitabilityconstant,firmswithinvestmentopportunitieskeeppayoutlowtoconservefunds,andpreservedebtcapacitysoasnottobeforcedintosellingequityinthefuture.Shyam-SunderandMyers1999findthatovertheperiod1971?

1989,peckingordertheoryhasmuchgreatertimeseriesexplanatorypowerthanthestatictradeoffmodel.Similarly,FameandFrench2002findmoreprofitablefirmsarelesslevered.However,usingapanelofIPOfirms,HeleneandLiang1996findnorelationshipbetweenthedecisiontoraiseexternalcapitalandtheshortfallofinternallygeneratedfunds.FrankandGoal2003concludethatovertheperiod1971?

1988,newequityissuestrackfinancingdeficitmorecloselythandebtissues.

MarketTimingtheoryhastworelatedimplications.First,itsuggeststhatfirmsissuesecuritieswhenthemarketconditionisfavorable,andavoidissuingwhenthemarketissluggish.Thispatternisconsistentwithanecdotalevidencethatpriorstockpricemovementand

perceptionofunder-orover-valuationoffirms’stockplayimportant

rolesinCFOs’decisiontoraiseexternalfunds.Assumingthattheratioofmarketvaluetobookvaluereflectsinvestmentopportunities,BakerandWurgler2002demonstratethatchangeinleverageisnegativelyrelatedtopreviousperiodmarket-to-bookratio.Theirdatarevealthatfinancingisdoneprimarilybyissuingequity,notwithretainedearnings.Second,currentleverageisadecreasingfunctionof‘externalfinanceweighted-average’ofpastmarket-to-bookratioswhichimpliesthatpastmarketvaluationhasapersistentlynegativeimpactonfirm’sleverageratio.BakerandWurgler’s2002evidenceisconsistentwiththisnotion,butcontrarytobothtradeoffandpeckingordertheoriesREITRegulatoryEnvironmentandCapitalStructure

REITsarenotrequiredtopaytaxesiftheydistribute90%oftaxableincomeasdividends.Thisnullifiestwoimportantbenefitsofdebt.One,taxdeductibilityofinterestpaymentsislost.Two,sincemostoftheincomeisdistributed,debtservicingisnotcriticalinmitigatingagencycostoffreecashflow.Costsoffinancialdistressfurtherdetractfromthevalueofdebtfinancing.Accordingly,thetrade-offtheorypredictsthatREITsshouldhavelowdebtintheircapitalstructure.But,anecdotalevidenceisnotconsistentwiththisprediction.REITscarrysignificantamountofdebt?

inoursample,debtaccountsformorethan50%offinancingatIPO,graduallyincreasingtoover65%in10yearsThe

peckingordertheoryofferssomerationalefortheuseofdebtfinancing?

debtispreferredbecauseshareholdersdiscountthevalueofnewequityoutofsuspicionthatmanagersuseprivilegedinformationtosellriskyequitywhenitisovervalued.Basedoninformationasymmetrybetweenmanagersandshareholders,peckingorderrequiresthatmanagershavefulldiscretionoverthechoiceoffundingOntheCapitalStructureofRealEstateInvestmentTrustsREITs85throughretainedearnings,debtandequity.ThismakestherelevanceofthepeckingordermodelsomewhatquestionableintheREITcontext.Toelaborate,highdividendpayoutreducesretainedearningsforREITssothatfundingchoiceislimitedtodebtandequity.2Underthisconstraint,stocksalesmaybeviewedwithlessskepticism.Inaddition,opinionvariesontheextentofinformationasymmetryintherealestatesector.Someholdthatwithlimitedinvestmentinhumancapital,andfewerstrategicgrowthopportunities,REITassetsarerelativelyeasiertovalue.OtherscontendthatanalysisofREITassetsrequiresspecialskillsandknowledgeaboutconditionsofcomparableproperties,complexfinancingarrangements,andgeneralandlocaleconomictrends.Han2004arguesthatfairmarketvaluesofrealestatetransactionsaredifficulttodeterminebecausetheyoftenincludeheterogeneous,andilliquidassets.Finally,someauthorsi.e.Campbell,Ghosh,andSirmans,2001arguethatregulatoryprovisionsrestrictingthesourcesofREITincome,andpotentialacquisitiontargets,tothereal

estatesector,anddiffusedownership,exacerbatetheinformationasymmetryproblem.Overall,howinformationasymmetryaffectsREITvaluationandfinancingchoiceisanopenquestion.Becauseoftheirhighpayoutrequirement,REITfinancingdecisionmaynotconformalsotothedynamicversionofthepeckingordertheorywhichstatesthatfirmsreducecurrentleveragetoavoidissuingequitywhenfuturecapitalneedsariseBrownandRiddiough2003studythepublicofferingsofequityREITsovertheperiod1993?

1998.TheauthorsreportthatmaturityofREITpublicdebtispositivelyrelatedtoofferspreadwhichisconsistentwiththepredictionsofthetargetdebtratiomodelofCollin-DufrenseandGoldstein2001.Corroborationforatargetlong-rundebtratiocomesfromtheevidencethatmajorityofthefirmsissuingdebtwasclusteredjustabovetheinvestment-graderating.Further,asignificantnumberofREITsthatissueequityarehighlyleveragedandremainsosubsequently.TheauthorsconcludethatREITslargelyfundinvestmentwithbanklinesofcreditandothersourcesofprivatedebt.Whenthesesourcesareexhausted,REITsaccessthepubliccapitalmarketandusetheissueproceedstopaydowncreditlinesinordertoprepareforthenextroundoffinancing.Confirmingthetrend,Ottetal.2005reportthatREITsfinanceover80%offirm-specificinvestmentthroughequityandlongtermdebt,clearlyaresultofthehighdividendpayment.Ourobjectiveistorelatethesedecisionstotheexistingtheory,REITinvestmentopportunitiesandthe

regulatorystructure.HypothesesThehypothesesaresummarizedinTable1.Tradeofftheorypredictsalowtargetdebtratio.Shorttermfluctuationsininvestmentopportunitiesmaymovethecapitalstructureawayfromthetarget,butiffirmsrebalance,nopersistentpatternbetweenleverageandmarket-to-bookwouldexist.Thesimplepeckingordertheoryinvokesinformationasymmetrybetweenshareholdersandmanagersandpredictsapositiverelationbetweendebtratioandinvestmentopportunities.SinceREITsarelimitedinfundingoptionsduetohighmandatorypayout,however,apositiverelationbetweenleverageandmarket-to-bookmaybeanartifactoftheuniqueregulatorystructure,notpurelyanattempttoavoidadverseselectioncosts.Thedynamicpeckingordertheoryimpliesanoppositerelationship.Themarkettimingtheorywhichstatesthatmanagersopportunisticallyissueequitywhenmarketvaluationsarehighandadverseselectioncostsarelow,impliesanegativerelationbetweenmarket-to-bookandleverageDataandSummaryStatistics

OurstudyincludesREITsthatwentIPOduring1991?

2003andforwhichallaccountingandfirmspecificinformationrequiredforana