Are there efficiency gains for larger Asian REITs?
Purpose – The purpose of this study is to test whether real estate investment trusts (REITs) are able to reap positive economies of scale with an enlarged asset base, which are translated into lower operating expenses, higher revenue, and better accessibility to capital at competitive costs. The paper aims to test economies of scale effects on expenses, revenue and equity return for REITs in Asia over a sample period from 2001 to 2007. Design/methodology/approach – Three different functional models are used (translog, semi-log quadratic and simple quadratic) to test the relations of asset size and squared asset size of REITs with expense variables. Findings – The semi-log quadratic models show significant positive economies of scale effects in all expenses categories except for property management fees after controlling for exogenous factors like country, year, diversification strategy and growth. The paper does not, however, find significant scale advantages in revenue, operating inco
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