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

Source ISSN

2154-8919

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): 331-364. Permalink.

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

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