Abstract:
The research explores the information content of earnings announcements in REITs operating in a market with less stable rental incomes. By examining the presence of Post-Earnings-Announcement Drift (PEAD) in Thai REITs, this study contributes to existing literature and investigates changes in market efficiency for REITs during the COVID-19 pandemic. Using the Earnings Announcement Returns (EAR) method, the study analyzes abnormal returns through visual analysis and a trust/firm-level regression framework.
Findings indicate a PEAD effect as the baseline for abnormal returns in the local market, suggesting potential market inefficiencies. However, most variables in regression analysis do not significantly address the research questions, except for firm size and earnings surprise. The study finds that being a Thai REIT or Real Estate Operating Company (REOC) does not have a significant effect on the PEAD effect. Additionally, larger market capitalization in REITs/REOCs is associated with reduced PEAD or greater price efficiency. Comparing alternative models incorporating market-based surprise indicators, the study observes firm or trust size as a key explanatory variable, regardless of earnings surprises or market-based indicators. This suggests that information asymmetry is influenced by firm or trust size, with larger firms attracting more analyst coverage, leading to increased information efficiency and reduced PEAD effect.
Regarding the impact of the COVID-19 pandemic, the study does not find significant evidence of a difference in the PEAD effect between the pre and post-COVID periods. Contrary to expectations, firms' market capitalization shows a slightly negative but highly significant coefficient. In summary, this study investigates the information content of earnings announcements in REITs and the impact of the COVID-19 pandemic on market efficiency. It provides insights into the PEAD effect, the role of firm size, and the limited influence of COVID-19 on REIT pricing. Further research could explore additional factors to gain a deeper understanding of market dynamics in the REIT context.
