TY - JOUR
T1 - Financial Flexibility and Manager–Shareholder Conflict
T2 - Evidence from REITs
AU - Riddiough, Timothy
AU - Steiner, Eva
N1 - Publisher Copyright:
© 2017 American Real Estate and Urban Economics Association
PY - 2020/3/1
Y1 - 2020/3/1
N2 - 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.
AB - 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.
UR - http://www.scopus.com/inward/record.url?scp=85079792560&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85079792560&partnerID=8YFLogxK
U2 - 10.1111/1540-6229.12226
DO - 10.1111/1540-6229.12226
M3 - Article
AN - SCOPUS:85079792560
SN - 1080-8620
VL - 48
SP - 200
EP - 239
JO - Real Estate Economics
JF - Real Estate Economics
IS - 1
ER -