Abstract
Executive SummaryThis study examines the determinants of credit ratings for real estate investment trusts (REITs). Probit and ordered probit results generally suggest reduced ratings (S&P and Fitch) for REITs with greater financial constraints. Higher rated REITs are larger with greater dividends, lower cash holdings, and less volatile dividends. The significance of leverage is conditional on econometric methodology and operating performance measure. Unlike for Fitch, operating performance influences S&P's rating assignments through earnings and not FFO. The latter challenges the credibility of S&P in the effective monitoring of REITs and highlights differences in financial characteristics accounted for by rating agencies.
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