Corporate Real Estate Sale and Leaseback Effect: Empirical Evidence from Europe


  • The authors would like to thank the two anonymous referees, Timo Rothovius and participants of the GSF workshop for their comments. Financial support from the Jenny and Antti Wihuri Foundation is gratefully acknowledged. Correspondence: Mika Vaihekoski.


Corporate real estate disposals have increased in Europe during the past few years. In this research paper, we study market reactions of publicly traded European companies' real estate sale and leaseback announcements during 1998–2004. This study is one of the first ones to study the sale and leaseback impact on corporate value with a pan-European data. We find that the sale and leaseback announcements have on average positive impact to firm's value which is in line with the previous studies. However, we also find that the positive effect is mainly caused by the deals with high transaction value to company market value ratio. Smaller transactions do not create on average any abnormal returns. Our results support the hypothesis that the positive sale and leaseback announcement effect is a consequence of revealed hidden value of the company's assets. Thus, sale and leaseback can also be seen as a mechanism for revealing the hidden value of company's assets to the market.