REITs’ Cash Holdings Around the Global Financial Crisis

We examine cash holdings of Real Estate Investment Trusts (REITs) and document that mortgage REITs (MREITs) hold more cash and equivalents than equity REITs, but the difference is reduced after the 2007 Global Financial Crisis. We find evidence indicating that MREITs managers hoard excessive cash, potentially, at a cost of returns to their investors before the Global Financial Crisis and that they reduce their cash holdings after the crisis. Post crisis, the factors determining cash holdings have a weaker effect, consistent with the conservatism motive. REITs hold more cash strategically for their capital investment, dividend payment, and expected shortage in operating cash flows.