The idiosyncratic characteristics of Turkish REITs: evidence from financial ratios

Celik E., Arslanlı K. Y.

JOURNAL OF EUROPEAN REAL ESTATE RESEARCH, vol.15, no.2, pp.192-207, 2022 (ESCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 15 Issue: 2
  • Publication Date: 2022
  • Doi Number: 10.1108/jerer-01-2021-0004
  • Journal Indexes: Emerging Sources Citation Index (ESCI), Scopus, ABI/INFORM, EconLit
  • Page Numbers: pp.192-207
  • Keywords: Error correction model, Market value, REIT, Return on assets
  • Istanbul University Affiliated: No


Purpose This paper aims to determine the specific financial ratio's effects on market value and return of assets for Turkish real estate investment trusts (REITs) traded at Istanbul Stock Exchange (ISE). The paper intends to define liquidity ratios, financial structure ratios, return ratios and stock performance ratios related to market value and return of asset. Design/methodology/approach The study includes 17 REITs traded in ISE. The period of study is specified as the year from 2009 to 2018. Panel data analysis is applied in this study. Dependent variables are current market value and return of assets, independent variables are 12 financial ratios, which are considered to explain the model significantly. These ratios will be calculated from audited year-end balance sheets for specific periods throughout at least ten years as time series. Two different models and hypotheses have been established to identify the financial ratios that affect the market value and return of assets for REITs. Findings According to the results, long-term financial loans/total assets, return of equity and working capital ratio are negatively correlated with market value, while market value/book value and total assets are correlated positively. On the other hand, market value/book value ratio, price/earning ratio, long-term financial loans/total assets and earnings per share are correlated with return of assets. REITs have high levels of financial leverage, especially in foreign currency. The striking point is that REITs hardly ever do not use financial derivatives to hedge their position again currency and interest rate risk. This approach makes the financial structures of REITs vulnerable and fragile against market volatility. Originality/value In Turkey, as an example of an emerging market, financial borrowing does not increase the return rates and market value for REITs due to market's idiosyncratic properties. This finding provides substantial insight into how the debt and equity allocation of Turkish REITs should be structured. Also, it has been observed that forward-looking expectations are considered more than the current situation in the market.