Abstract
Executive Summary. This study examines the wealth effects surrounding announcement of flexible bank credit facilities arranged by Equity Real Estate Investment Trusts (EREITs) during the modern REIT era, 1994-2004. The findings reveal significantly positive shareholder wealth effects in a sample of 83 announcements of new credit lines. Announcements of increases in existing credit lines have no shareholder wealth implications. Wealth creation is greater when the amount of the credit facility is larger than average, measured as a percentage of the firm’s total assets. Consistent with the relationship banking literature, this wealth creation is attributed here to a signal of positive asymmetric information regarding the firm’s investment opportunity set.
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