Capital structure determinants under exclusive REIT regulations: US and Turkish REITs

Abstract

The purpose of this study is to determine the impact of these differences on capital structure of real estate investment trusts in the United States and Turkey. This paper includes 110 real estate investment trusts traded on the New York and Istanbul Stock Exchanges for the period from 2013 to 2022. Capital structure is proxied by book leverage and market leverage as dependent variables. Firm specific, financial market specific and macroeconomic factors are included in the model as independent variables. Findings indicate that negative relationships exist between firm age, level of capital market development, operating risk, and market leverage, while a positive relationship exists between the level of bond market development and market leverage for the United States and Turkey. US-REITs demonstrate a preference for equity financing over debt financing, given the more advanced capital markets. As REITs gain experience and mature within the sector, there is a tendency to place greater importance on internal resources and to rely less on external sources. This paper partially fills the literature gap by revealing the capital structures of REITs and their compliance with capital structure theories. The results of this research are consistent with trade off and pecking order theories.