Takeovers and the market for corporate control in Japanese reits

Japanese real estate investment trusts (J-REITs) were established in 2001. They have rapidly grown in number and size and there have been many J-REIT mergers following the Global Financial Crisis (GFC). J-REITs typically have a common ownership that renders most takeovers friendly, therefore the motivation for mergers is likely related to financial hardship. We examine the market response and the post- merger performance of these J-REIT mergers. We find significant abnormal trading volume for both surviving and absorbed J-REITs in the immediate days before the merger. Absorbed J-REITs suffer a significantly negative return in the two days before the merger announcement and there is no observed improvement in the post-merger operating performance. Unlike other mergers in Japan, the merger premium for J-REITs is inversely predictive of post-merger performance