Political Risk and the Cost of Capital in Asia-Pacific Property Markets

Author: George D. Cashman, David M. Harrison, Hainan Sheng

Start Page: 331
End Page: 364
Volume: 18
Issue Number: 3
Year: 2015
Publication: International Real Estate Review


This study investigates the impact of political risk on the cost of capital for publicly traded real estate firms. More specifically, by using a sample of 102 REITs and listed property trusts, which hold nearly 6,000 distinct investment properties across the Asia-Pacific region, we find strong empirical evidence that increased exposure to political risk increases both the cost of equity financing of a firm and its weighted average cost of capital. Interestingly, no such linkages are apparent between political risk and the cost of debt of a firm. These empirical results are robust to a variety of alternative measures of political risk, including a: 1) political rights index, 2) political change index, and 3) corruption perceptions index.


political risk; cost of capital; REITs and listed property trusts; international real estate

download.gif (981 bytes)

Back to Previous Page

All articles listed here are available for download in portable document format (PDF).