The Journal of Real Estate Finance and Economics

, Volume 39, Issue 1, pp 39–57

The Determinants of REIT Cash Holdings

Authors

  • William G. HardinIII
    • Department of Finance, College of Business AdministrationFlorida International University
  • Michael J. Highfield
    • Department of Finance and Economics, College of Business and IndustryMississippi State University
    • Department of Finance, School of Business AdministrationUniversity of Mississippi
  • G. Wayne Kelly
    • Department of Finance and Economics, College of Business and IndustryMississippi State University
Article

DOI: 10.1007/s11146-007-9103-1

Cite this article as:
Hardin, W.G., Highfield, M.J., Hill, M.D. et al. J Real Estate Finan Econ (2009) 39: 39. doi:10.1007/s11146-007-9103-1

Abstract

The factors influencing the cash holdings of REITs are examined with the view that the REIT industry should yield new information regarding the drivers of corporate cash policy due to their unique operating conditions. The availability of REIT line of credit data also allows us to test the association between cash holdings and line of credit access and use. Data constraints in prior investigations have left this an unresolved empirical question in the cash holdings literature. The baseline results show that REIT cash holdings are inversely related to funds from operations, leverage, and internal advisement and are directly related to the cost of external finance and growth opportunities. Cash holdings are also negatively associated with credit line access and use. The results imply that REIT managers elect to hold little cash to reduce the agency problems of cash flow thereby increasing transparency and reducing the future cost of external capital.

Keywords

REITCashLiquidityCash flowWorking capital

JEL Classification

G12G14G24

Copyright information

© Springer Science+Business Media, LLC 2007