房地产企业的规模效应和规模经济外文文献翻译.docx
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房地产企业的规模效应和规模经济外文文献翻译.docx
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房地产企业的规模效应和规模经济外文文献翻译
房地产企业的规模效应和规模经济外文翻译2019
英文
SizeeffectsandeconomiesofscaleinEuropeanrealestatecompanies
BrentAmbrose,FranzFuerst
Abstract
ThisstudyinvestigatesscaleeconomiesinEuropeanrealestatecompanies.Weexaminetheeffectsofsizeonrevenue,expense,profitabilityratiosandcapitalcostsusingpaneldataregression.WefindthatlargerrealestatecompaniesinEuropeareabletogeneratehigherrevenueperunitofcompanysize,incurlowercostsandproducehigherreturns.NetOperatingIncomeratiosandreturnratiosincreasewhileSelling,GeneralandAdministrativeexpenseratiosdecreasewiththesizeofacompany.However,wedonotfindevidencethatlargercompanieshavelowercostofdebtorlowerweightedaveragecostofcapital.Fromouranalysis,itisevidentthatparticularlysmallfirmscanreapsubstantialeconomiesofscaleastheygrow.However,thebenefitsoffurthergrowthtendtobemuchmoremodestforlargercompanies.GivenREITsareonaveragelargerthancomparablenon-REITsthismayexplainwhyREITshavelowereconomiesofscaleinexpensesandrevenuesthanNon-REITrealestatecompanies.
Keywords:
Scaleeconomies,Size,REITs,Realestate
Theclassiceconomiesofscaleargumentwithrespecttorealestatesuggeststhatasrealestateportfoliosincreaseinsize,theincrementalcostofmanagingadditionalpropertiesshouldfall(Ambrose,Highfield,&Linneman,2005; Kim,1986).Thisargumentarisesfromtwosources.First,fixedcostelementscanbesharedacrossproperties,andsecond,thatlargerfirmsinfragmentedmarketshavegreater bargainingpower.Inaddition,largerpropertycompaniesshouldalsohaveaccesstobetterdebttermsandalowercostofcapital,astheyhaveaccesstomorefinancesources(Barclay&Smith,1995; Titman&Wessels,1988).
Realestatecompanieswithlargerpropertyportfoliosshouldbemoreefficientthanthosewithsmallerportfolios.Asfirmsgrowandaddproperties,costsshouldriselessthantheincreaseinassetvalueundermanagement.Ifthisisthecase,largerrealestatecompaniesshouldbemoreprofitable,thusprovidingarationalefor mergersandacquisitions.However,isolatingtheeffectsofscaleischallenging,asitisnecessarytocontrolforalargenumberofcharacteristics.Togivejustafewexamples,aportfolioofolderpropertiesmayincurhigherexpenditure,distancebetweenmanagementandtheirpropertyportfoliosmayleadtoinefficienciesorlowerreturns,companiesdifferintheextenttowhichdevelopmentactivitiesarepartoftheirbusinessmodelandintheextentthatoperationalmanagementisresourcedinternally,externallyorinjointventuresetc.However,thisstudytakesasystematicapproachtotheestimationoftheeffectofscalebytakingintoaccountcountry,sectorandotherpotentialdriversofdifferencesacrossfirms(totheextentthatdataisavailable).
Whiletherearestrongargumentsthatscaleshouldofferbenefits,counterargumentssuggestthatlargerfirmsaresubjecttoconsiderablediseconomiesofscale.Forexample,theymayfindspecialistresourcesarespreadtoothinly,whichmayleadtopoorerdecision-making.Largercompaniesalsorequireadditionalresourcestoco-ordinateandmanageactivitiesthatsmallercompaniescanmanageonanadhocbasis.Largercompaniesmayalsoget“conflictedout”ofoperatingincertainmarkets.Finally,largercompaniesmayfindithardtomaintainthesamepassion,driveandincentivizationthatsmallerorganizationscanachieve.Consequently,itisfarfromclearthattherewillbeastrongrelationshipbetweensizeandperformance.
WhilemostpreviousstudieshavefocusedontheeconomiesofscaleforUS RealEstateInvestment Trusts(REITs),thisstudyinvestigateseconomiesofscaleforEuropeanREITs/realestatecompanies.UnliketheUSmarket,wherethelisted realestatemarket ismorematureandconsolidated,theEuropeanmarketisrelativelynewandhasgrowndramaticallyoverthelasttwodecadeswithitsgrowthfacilitatedbytheintroductionofREITregimesacrossEuropeandevelopedmarketsoverthepast15 years.EuropeisamorefragmentedmarketthantheUSwithculturaldifferencesanddifferencesinleasingconventionsandmarketnormsacrosscountries(andwithincountries)andthismaymakeeconomiesofscalehardertoachievethanforUScompanies.Previously,duetothelimitationsofdataandthesizeofEuropeanrealestatecompanyuniverse,itwasdifficulttoeconometricallymeasureeconomiesofscale.Inthisstudy,weobtain2134firmyearobservationsusingasampleof232listedEuropeanrealestatecompaniesacrosstheperiod2001to2015.Therichnessofthedatasetensuresasufficientrangeofcompanysizebothcross-sectionally,andovertime.Furthermore,wealsohaveasufficientnumberofmergersandacquisitionstotesttheeffectoftheseoneconomiesofscale.
Thisstudybrieflysummarizestherelatedliteratureandtheissuesarisingfromit.WethenconsidereconomiesofscalesofEuropeanrealestatecompaniesusingpaneldataregression.Theresultsshowthatlargerrealestatecompaniestendtogeneratemorerevenue,incurlowercostsandproducehigherreturnsbutthereisnoevidencethatlargercompanieshavelowercostofcapital.Furthermore,REITshavelowereconomiesofscaleinexpensesandrevenuethannon-REITrealestatecompaniesaftercontrollingforfirmcharacteristics.
ThelimitedsizeoftheREIT/realestatecompanyuniversemeanthattheearlystudiesofthe1970sand1980sstruggledtofindeconomiesofscale.However,thisisnotuncommonacrossindustries.As Ambroseetal.(2005) pointout,theabilitytoeconometricallymeasureeconomiesofscaleofteneludesthetechnologyanddataathand.Indeedearlystudiessuggesteda“smallfirmeffect”inUSREITs,withsmallerfirmsearninghigheraveragereturnsthanlargefirms(McIntosh,Liang,&Tompkins,1991). Ambroseetal.(2005) giveexamplesofeconomiesofscalearisingthroughindustryconsolidationandfirmsizeinindustriessuchasrailroads,airlines,cement,steel,brewing,andoilandgasexploration.
Economiesofscalecanarisefromavarietyoffactors.Firstly,scaleeconomiesmayexistinafirm'scostofcapital.Forexample,largerfirmsoftenissueequityanddebtingreateramountsleadingtolowerunderwritingspreads(Hansen&Torregrosa,1992).Studiesdatingbacktothe1960sdocumentthatlargerfirmshavelowercostsofraisingnewcapital(Archer&Faerber,1966).Secondly,scaleeconomiesareassociatedwithgreateroperatingefficiencyandprofitability.Insupportoftheroleofoperatingefficiencies,studieshaveshownthateconomiesofscaleinoperationsoftenresultfromhorizontalconsolidationwithinindustries(Eckbo,1992)implyingthatsizeleadstoloweroperatingcosts.Intherealestateindustry, Ambrose,Ehrlich,Hughes,andWachter(2000) reportthatlargeREITshavehighernetoperatingincome(NOI)growth.Inaddition, BersandSpringer(1998) and CapozzaandSeguin(1998) reportevidenceconsistentwithscaleeconomiesexistinginREITgeneralandadministrative(G&A)costs.Forexample, CapozzaandSeguin(1998) notethatREITswithhigherproperty-levelG&Aexpenseshavelowershareholder'sreturn,suggestingthemarketpenalisesfirmswithoutsufficientscaleeconomies.
Oneoftheproblemswithidentifyingeconomiesofscaleinempiricalstudiesisthatthe econometric techniquesanddataareoftennotsufficienttouncovertheeffect(Ambroseetal.,2005).Forexample, Ambroseetal.(2000) reportthattheirobservedlinkbetweenNOIgrowthandfirmsizeisweak.Furthermore, CapozzaandSeguin(2000) findresultsthatareinconsistentwithscaleeconomiesinG&Aexpenses,incontradictiontotheirearlierstudy(Capozza&Seguin,1998).Althoughpreviousresearchseemstoimplythateconomiesofscaleexistwithrespecttocapitalcosts, BersandSpringer(1998) findsmalldiseconomiesofscalewithrespecttointerestexpense. CapozzaandSeguin(2000) reportaweaknegativerelationshipbetweeninterestexpenseandfirmsize.Thus,thequestionoftheexistenceofeconomiesofscaleinrealestatecompaniesremainsanimportantquestion,particularlyinthecontextofpressuresforconsolidationintheindustry.
Researchfromlaterinthe1990sandearly2000susingdatafromthe1990ssuchas BersandSpringer(1997), CapozzaandSeguin(1998) and AmbroseandLinneman(2001) findevidenceofscaleeconomies.Thesestudiesdistinguishbetweeneconomiesofscaleinexpensesandtheimpactofsizeoncapitalcostsandscaleeffectsonearningsgrowthpotential.Intermsofthevariousexpenseitems(generalandadministrative(G&A),interestcosts,managementfees,otheroperatingexpenses),economiesofscalearemoreevidentinsmallerexpenseitems.Thus,thesestudiesconcludethatthegainsfromeconomiesofscalearemodest.Indeed Yang(2001),suggeststhatthenon-linearnatureofeconomiesofscaleentailsdiseconomiesofscaleforlargerrealestatecompanies.However, Ambroseetal.(2005) findevidencetosupportalinkbetweenfirmprofitabilityandfirmsize.Additionally,theyidentifythatlargeREITshavebetterprospectsforfurthergrowthwhilesucceedingatloweringtheircosts.TheirevidencefromthestochasticfrontieranalysispointstofurtherefficiencygainsfromcontinuedgrowthandconsolidationinREITs.However, Miller,Clauretie,andSpringer(2006),lookingatsimilartimeperiods,findlittleevidenceofscaleeconomiesinREITs. Feng,Price,andSirmans(2011) reportthatregulationchangesinthe1980sand1990s,whichfacilitatedverticalintegrationandinternalmanagementledtoconsolidationandgrowthintheREITindustryinUS.However, TopuzandIsik(2009) showthatalthoughefficiencyin
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