Impact of the Asian financial crisis on corporate real estate acquisitions

Abstract

Purpose

The purpose of this paper is to examine the stock price reactions to the announcements of corporate real estate acquisitions by listed non‐property companies in Malaysia and whether acquisitions under different economic conditions lead to different share price reactions.

Design/methodology/approach

This research applies the event study approach.

Findings

It is found that the cumulative abnormal returns associated with the property acquisitions differ significantly in different economic conditions. Price reaction for property acquisitions before the Asian financial crisis is consistent with the normal investor expectations of increasing shareholder value. However, property acquisitions during and after the crisis have negative wealth effects.

Research limitations/implications

The research is limited in that it has considered only the Asian financial crisis. Further research might explore the impact of other forms of economic conditions on wealth effects of corporate real estate acquisitions.

Practical implications

The research clearly identified the need to consider economic conditions as a factor affecting wealth effects of property acquisitions. The findings of this study are useful to decision makers of multinational companies which have significant corporate real estate investments in China, India and developing countries.

Originality/value

The paper argues that the wealth effect of corporate real estate acquisitions is affected by economic condition.

Citation

Kien Hwa, T. (2007), "Impact of the Asian financial crisis on corporate real estate acquisitions", Journal of Corporate Real Estate, Vol. 9 No. 4, pp. 239-256. https://doi.org/10.1108/14630010710848476