Financial Flexibility and Manager–Shareholder Conflict: Evidence from REITs

Timothy Riddiough, Eva Steiner

Research output: Contribution to journalArticlepeer-review

20 Scopus citations


Using equity Real Estate Investment Trust data, we show empirically that the use of unsecured debt, which contains standardized covenants that place limits on total leverage and the use of secured debt, is associated with lower leverage outcomes. We then show that firm value is sensitive to leverage levels, where lower leverage is associated with higher firm value. In the presence of weak managerial governance, our results suggest that unsecured debt covenants function as a managerial commitment device that preserves the firm's debt capacity to enhance financial flexibility.

Original languageEnglish (US)
Pages (from-to)200-239
Number of pages40
JournalReal Estate Economics
Issue number1
StatePublished - Mar 1 2020

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics


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