Information Content and Dividend Policy of Publicly Listed Real Estate Firms in Singapore

Publicly listed real estate firms offer an indirect form of real estate investment in Singapore, which are a less restrictive in terms of dividend distribution and asset holding requirements compared to the REITs. Do the dividend policies of these real estate firms differ from those adopted by the US REITs as shown in the earlier findings by Wang, Erickson and Gau (1993) and Bradley, Capozza and Seguin (1998)? Our empirically results favor the agency costs hypothesis, which predicts a positive relationship between firms’ debt-to-asset ratio and dividend payouts. The agency costs effects were differentiated by the dividend yields of the real estate firms. Firm size was also not a good proxy for cash flow volatility, and there were no significant signal in the dividend policy of firms with different market capitalization. The results rejected the dividend signaling hypothesis. However, the value-penalty hypothesis of Bradley, Capozza and Seguin (1998) that imposes downward corrections of stock prices for firms that fail to meet the divided target was not rejected. Firms with constant dividend payouts were also penalized with a 7.6% discount to the stock price compared to firms that distribute higher dividends than the previous years.