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Abstract
Capital structure issues are of great importance within the corporate finance literature. Exploration of these issues within the Real Estate Investment Trust (REIT) industry provides the opportunity to examine these issues within a unique and homogeneous environment. It is a well-known finding within the corporate finance literature that key elements of a firm’s financial policy are jointly determined. Controlling for this endogenous relationship, our model explores the relationships between leverage, debt maturity, bond covenants, and secured debt for REITs. We identify relationships unique to the REIT industry and document the importance of secured debt to these relationships. Further exploring sources of capital, we turn our analysis to foreign investment. Foreign investment in REITs has received growing attention recently as important changes in tax legislation have eased restrictions imposed on foreign investors. Following previous literature, we complete an in depth analysis of the determinants of institutional investment in REITs, specifically focusing on foreign investment. We identify key differences specific to foreign investors in REITs. Finally, in an effort to better understand the influence of foreign investment, we test the two-way relationship between foreign investment and REIT returns by examining foreign capital flows. We additionally document the relationship between foreign capital flows and return volatility.