FINANCIAL GEARING AND ITS EFFECT ON REIT COST OF CAPITAL: EVIDENCE FROM NIGERIA

Abstract

This study investigated the capital structure choices of Nigerian Real Estate Investment Trusts (NREITs) from 2010-2022, focusing on their debt-equity ratios, return on assets, and return on equity. Three NREITs were analyzed using descriptive and inferential statistics, employing regression analysis and Levene's t-test. Findings showed that NREITs deviated from the pecking order theory regarding capital structure. No substantial correlations existed between debt-equity ratio, shareholder equity, and returns. The tradeoff theory explained NREITs' capitalization best. Firm-level solvency ratios indicated sustainable performance. Despite financial leverage having minimal effect on NREIT returns, this study offers valuable guidance for managers and policymakers concerning optimal capital structures and value generation. Further research should consider macroeconomic factors and various REIT sectors.

Keywords: Capital structure decisions, Debt-equity ratio, Real Estate Investment Trusts (REITs), Return on assets, Return on equity.