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Debt diversification and investments of European listed real estate companies

Alexey Zhukovskiy (Aalto University, Espoo, Finland)
Heidi Falkenbach (Aalto University, Espoo, Finland)
Ranoua Bouchouicha (Department of Economics, Ghent University, Ghent, Belgium)

Journal of European Real Estate Research

ISSN: 1753-9269

Article publication date: 4 December 2020

Issue publication date: 4 June 2021




This paper aims to examine the relationship between the use of public debt and investment activity of European listed real estate companies.


Using a hand-collected sample of debt structures of 102 European public real estate companies, and using European Central Bank lending standards survey as a proxy for bank credit availability, the authors test a conditional hypothesis on the relationship between investment rates and the use of public debt during period of constrained bank lending environment in Europe.


The results show that ex ante diversification of debt allows retaining higher investment rates when the main source of debt, bank lending, is shrinking. The effect is statistically and economically significant and increases during times of tight bank lending constraints. The authors find no support to debt capacity explanation of the effect. They neither find support of the higher investment rates to be indicative of overinvestment problem. The results are robust to alternative model specifications and estimators.

Research limitations/implications

The empirical analysis is limited to Europe.

Practical implications

Investments and the growth of real estate companies depend on their ability to seize value-increasing opportunities that arise in the competitive markets. This paper evaluates the role of a diversified debt structure in this context. The results suggest that debt structure can have material importance for the investment activity of European listed real estate companies and issuance of public debt can help companies to counterbalance the negative effects of restricted bank loan supply on the investment levels.


The paper extends the literature on debt structures of listed real estate firms by considering the effect of debt diversification on investments.



The authors thank the European Public Real Estate Association (EPRA) for financial support.


Zhukovskiy, A., Falkenbach, H. and Bouchouicha, R. (2021), "Debt diversification and investments of European listed real estate companies", Journal of European Real Estate Research, Vol. 14 No. 1, pp. 62-83.



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