The Journal of Real Estate Finance and Economics

, Volume 38, Issue 2, pp 105–114 | Cite as

The Long-Horizon Performance of REIT Mergers

  • Robert D. Campbell
  • Erasmo Giambona
  • C. F. Sirmans


We study long-horizon shareholder returns in a comprehensive sample of Real Estate Investment Trust (REIT) mergers, to test whether or not the anomaly of post-merger underperformance observed in conventional firms applies to the case of REITs. Constructing synthetic benchmark portfolios controlling for firm size and for book-to-market value ratio, we find that 60-month buy-and-hold abnormal returns for REIT acquirers are significantly negative at approximately −10%, supporting the position that REIT merger acquirers underperform non-merging REITs in the long run. We find no evidence to challenge previous studies reporting positive announcement period returns for acquirers when the target is privately held, but we do find evidence that these positive returns do not persist. The long term performance of acquiring REITs is approximately the same whether the target is public or private.


Real Estate Investment Trusts REITs EREITs Mergers Buy-and-hold abnormal returns BHARs Post-merger performance 

JEL Classifications

G14 G34 


  1. Agrawal, A., Jaffe, J. F., & Mandelker, G. N. (1992). The post-merger performance of acquiring firms: A re-examination of an anomaly. Journal of Finance, 47, 1605–1621.CrossRefGoogle Scholar
  2. Asquith, P. (1983). Merger bids, uncertainty, and stockholders returns. Journal of Financial Economics, 11, 51–83.CrossRefGoogle Scholar
  3. Banz, R., & Breen, W. (1986) Sample-dependent results using accounting and market data: Some evidence. Journal of Finance, 41, 779–794.CrossRefGoogle Scholar
  4. Barber, B., & Lyon, J. (1997). Detecting long-run abnormal stock returns: The empirical power and specification of test statistics. Journal of Financial Economics, 43, 341–372.CrossRefGoogle Scholar
  5. Bouwman, C. H. S., Fuller, K., & Nain, A. S. (2007). Market valuation and acquisition quality: Empirical evidence. Review of Financial Studies, in press.Google Scholar
  6. Campbell, R. D., Ghosh, C., & Sirmans, C. F. (1998). The great REIT consolidation: Fact or fancy? Real Estate Finance, 15, 45–54.Google Scholar
  7. Campbell, R. D., Ghosh, C., & Sirmans, C. F. (2001). The information content of method of payment in mergers: Evidence from real estate investment trusts (REITs). Real Estate Economics, 29, 361–387.CrossRefGoogle Scholar
  8. Campbell, R. D., Ghosh, C., & Sirmans, C. F. (2005). Value creation and governance structure in REIT mergers. Journal of Real Estate Finance and Economics, 31, 225–239.CrossRefGoogle Scholar
  9. Chang, S. (1998). Takeovers of privately held targets, methods of payment, and bidder returns. Journal of Finance, 53, 773–784.CrossRefGoogle Scholar
  10. Cowan, A., & Sargeant, A. (2001). Interacting bias, non normal return distributions and the performance of tests for long horizon event studies. Journal of Banking and Finance, 25, 741–765.CrossRefGoogle Scholar
  11. Fama, E. (1970). Efficient capital markets: A review of theory and empirical work. Journal of Finance, 25, 383–417.CrossRefGoogle Scholar
  12. Fama, E. (1998). Market efficiency, long-term returns, and behavioral finance. Journal of Financial Economics, 49, 283–306.CrossRefGoogle Scholar
  13. Giambona, E., Giaccotto, C., & Sirmans, C. F. (2005). The long-run performance of REIT stock repurchases. Real Estate Economics, 33, 351–380.CrossRefGoogle Scholar
  14. Kothari, S., & Warner, J. (1997). Measuring long-horizon security performance. Journal of Financial Economics, 43, 301–339.CrossRefGoogle Scholar
  15. Langetieg, T. (1978). An application of a three-factor performance index to measure stockholder gains from merger. Journal of Financial Economics, 6, 365–384.CrossRefGoogle Scholar
  16. Loderer, C., & Martin, K. (1992). Postacquisition performance of acquiring firms. Financial Management, 21, 69–79.CrossRefGoogle Scholar
  17. Loughran, T., & Vijh, A. M. (1997). Do long-term shareholders benefit from corporate acquisitions? Journal of Finance, 52, 1765–1790.CrossRefGoogle Scholar
  18. Lyon, J., Barber, B., & Tsai, C. (1999). Improved methods for tests of long-run abnormal stock returns. Journal of Finance, 54, 165–201.CrossRefGoogle Scholar
  19. Rau, R., & Vermaelen, T. (1998). Glamour, value, and post acquisition performance of acquiring firms. Journal of Financial Economics, 49, 223–253.CrossRefGoogle Scholar
  20. Sahin, O. F. (2005). The performance of acquisitions in the real estate investment trust industry. Journal of Real Estate Research, 27, 321–342.Google Scholar
  21. Savor, P. (2006). Do stock mergers create value for acquirers? Boston: Harvard Business School.Google Scholar
  22. Sudarsanam, S., & Mahate, A. (2003). Glamour acquirer, method of payment and post-acquisition performance: The UK evidence. Journal of Business Finance and Accounting, 30, 299–341.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  • Robert D. Campbell
    • 1
  • Erasmo Giambona
    • 2
  • C. F. Sirmans
    • 3
  1. 1.Department of Finance, Frank G. Zarb School of BusinessHofstra UniversityHempsteadUSA
  2. 2.Finance Group, Amsterdam Business SchoolUniversity of AmsterdamAmsterdamThe Netherlands
  3. 3.Department of Finance, School of BusinessUniversity of ConnecticutStorrsUSA

Personalised recommendations