Debt diversification and investments of European listed real estate companies

Alexey Zhukovskiy, Heidi Falkenbach*, Ranoua Bouchouicha

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

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In this paper, we examine the relationship between the use of public debt and investment activity of European listed real estate companies.
Employing a hand-collected sample of debt structures of 102 European public real estate companies, and using ECB bank lending standards survey as a proxy for bank credit availability, we test a conditional hypothesis on the relationship between investment rates and the use of public debt during period of constrained bank lending environment in Europe.
Our results show that ex-ante diversification of debt allows retaining higher investment rates when the main source of debt, bank lending, is shrinking. The effect is statistically and economically significant and increases during times of tight bank lending constraints. We find no support to debt capacity explanation of the effect. We neither find support of the higher investment rates to be indicative of overinvestment problem. The results are robust to alternative model specifications and estimators.
The empirical analysis is limited to Europe.
Investments and the growth of real estate companies depend on their ability to seize value-increasing opportunities that arise in the competitive markets. This paper evaluates the role of a diversified debt structure in this context.

Our results suggest that debt structure can have material importance for the investment activity of European listed real estate companies and issuance of public debt can help companies to counterbalance the negative effects of restricted bank loan supply on the investment levels.
The paper extends the literature on debt structures of listed real estate firms by considering the effect of debt diversification on investments.
Original languageEnglish
Number of pages22
JournalJournal of European Real Estate Research
Early online date4 Dec 2020
Publication statusPublished - 4 Dec 2020
MoE publication typeA1 Journal article-refereed


  • debt diversification
  • debt structure
  • European listed real estate
  • investments
  • capital structure


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