Title

Political Risk and the Cost of Capital in Asia-Pacific Property Markets

Document Type

Article

Language

eng

Publication Date

2015

Publisher

Asian Real Estate Society

Source Publication

International Real Estate Review

Abstract

This study investigates the impact of political risk on the cost of capital for publicly traded real estate firms. More specifically, by using a sample of 102 REITs and listed property trusts, which hold nearly 6,000 distinct investment properties across the Asia-Pacific region, we find strong empirical evidence that increased exposure to political risk increases both the cost of equity financing of a firm and its weighted average cost of capital. Interestingly, no such linkages are apparent between political risk and the cost of debt of a firm. These empirical results are robust to a variety of alternative measures of political risk, including a: 1) political rights index, 2) political change index, and 3) corruption perceptions index.

Comments

International Real Estate Review, Vol. 18, No. 3 (2015)L 331-364. Persistent Link, © 2015 The Asian Real Estate Society (AsRES). Used with permission.

George D. Cashman was affiliated with Texas Tech University at time of publication.

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