Implications of dividend tax reforms on M-REITs performance

Purpose:The purpose of this paper is to examine the performance of 19 Malaysian Real Estate Investment Trusts (M-REITs) over the period 1999 to 2014, following the implementation of dividend tax reforms announced in the 2007, 2009 and 2012 budgets.Design/methodology/approach: Sharpe index, Treynor i...

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Main Authors: Abdullah, Nur Adiana Hiau, Taufil Mohd, Kamarun Nisham, Wong, Woei Chyuan
Format: Article
Language:English
Published: Emerald Publishing Limited 2017
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Online Access:http://repo.uum.edu.my/25610/1/JPIF%2035%202%202017%20184%20199.pdf
http://repo.uum.edu.my/25610/
http://doi.org/10.1108/JPIF-11-2016-0087
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spelling my.uum.repo.256102019-02-19T08:32:24Z http://repo.uum.edu.my/25610/ Implications of dividend tax reforms on M-REITs performance Abdullah, Nur Adiana Hiau Taufil Mohd, Kamarun Nisham Wong, Woei Chyuan HJ Public Finance Purpose:The purpose of this paper is to examine the performance of 19 Malaysian Real Estate Investment Trusts (M-REITs) over the period 1999 to 2014, following the implementation of dividend tax reforms announced in the 2007, 2009 and 2012 budgets.Design/methodology/approach: Sharpe index, Treynor index and Jensen α are utilized to compare the performance of M-REITs against a newly developed tax-adjusted value-weighted M-REITs index, equity market, property sector and three month Malaysia Treasury Bills (T-Bills). The calculation of M-REITs returns has been adjusted to take into account the dividend tax reforms which have never been considered in previous studies.Findings: Most M-REITs outperform the tax-adjusted value-weighted REITs index, equity market, property sector and three month T-Bills. Property sector performs worst during those periods. Some of the M-REITs have a higher standard deviation than the equity market and the tax-adjusted value-weighted M-REITs index. Most M-REITs have a lower total risk than the property sector. Further analysis shows that before (after) the tax reforms, most M-REITs underperform (outperform) the other sectors. The introduction of the tax reforms benefits both REITs and investors. A significant positive Jensen α for some M-REITs indicates that fund managers are able to time the market or to select undervalued assets.Practical implications Findings of the study would enable investors to evaluate the performance of all REITs in comparison to other financial assets during the period of study for better investment decision making. A more accurate assessment on REITs performance that take into account the tax reforms, is available for investors and fund managers to decide on the investment mix to be included in their portfolio. Moreover, fund managers’ performance can be assessed whether they perform better or worse than the equity market, property sector and three month T-Bills.Originality/value: This study contributes to the scant literature on dividend tax reforms and their implication toward REITs performance. It is the first study to thoroughly assess the returns of REITs by taking into account the changes on dividend tax rates announced in the 2007, 2009 and 2012 budgets. Emerald Publishing Limited 2017 Article PeerReviewed application/pdf en http://repo.uum.edu.my/25610/1/JPIF%2035%202%202017%20184%20199.pdf Abdullah, Nur Adiana Hiau and Taufil Mohd, Kamarun Nisham and Wong, Woei Chyuan (2017) Implications of dividend tax reforms on M-REITs performance. Journal of Property Investment & Finance, 35 (2). pp. 184-199. ISSN 1463-578X http://doi.org/10.1108/JPIF-11-2016-0087 doi:10.1108/JPIF-11-2016-0087
institution Universiti Utara Malaysia
building UUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Utara Malaysia
content_source UUM Institutionali Repository
url_provider http://repo.uum.edu.my/
language English
topic HJ Public Finance
spellingShingle HJ Public Finance
Abdullah, Nur Adiana Hiau
Taufil Mohd, Kamarun Nisham
Wong, Woei Chyuan
Implications of dividend tax reforms on M-REITs performance
description Purpose:The purpose of this paper is to examine the performance of 19 Malaysian Real Estate Investment Trusts (M-REITs) over the period 1999 to 2014, following the implementation of dividend tax reforms announced in the 2007, 2009 and 2012 budgets.Design/methodology/approach: Sharpe index, Treynor index and Jensen α are utilized to compare the performance of M-REITs against a newly developed tax-adjusted value-weighted M-REITs index, equity market, property sector and three month Malaysia Treasury Bills (T-Bills). The calculation of M-REITs returns has been adjusted to take into account the dividend tax reforms which have never been considered in previous studies.Findings: Most M-REITs outperform the tax-adjusted value-weighted REITs index, equity market, property sector and three month T-Bills. Property sector performs worst during those periods. Some of the M-REITs have a higher standard deviation than the equity market and the tax-adjusted value-weighted M-REITs index. Most M-REITs have a lower total risk than the property sector. Further analysis shows that before (after) the tax reforms, most M-REITs underperform (outperform) the other sectors. The introduction of the tax reforms benefits both REITs and investors. A significant positive Jensen α for some M-REITs indicates that fund managers are able to time the market or to select undervalued assets.Practical implications Findings of the study would enable investors to evaluate the performance of all REITs in comparison to other financial assets during the period of study for better investment decision making. A more accurate assessment on REITs performance that take into account the tax reforms, is available for investors and fund managers to decide on the investment mix to be included in their portfolio. Moreover, fund managers’ performance can be assessed whether they perform better or worse than the equity market, property sector and three month T-Bills.Originality/value: This study contributes to the scant literature on dividend tax reforms and their implication toward REITs performance. It is the first study to thoroughly assess the returns of REITs by taking into account the changes on dividend tax rates announced in the 2007, 2009 and 2012 budgets.
format Article
author Abdullah, Nur Adiana Hiau
Taufil Mohd, Kamarun Nisham
Wong, Woei Chyuan
author_facet Abdullah, Nur Adiana Hiau
Taufil Mohd, Kamarun Nisham
Wong, Woei Chyuan
author_sort Abdullah, Nur Adiana Hiau
title Implications of dividend tax reforms on M-REITs performance
title_short Implications of dividend tax reforms on M-REITs performance
title_full Implications of dividend tax reforms on M-REITs performance
title_fullStr Implications of dividend tax reforms on M-REITs performance
title_full_unstemmed Implications of dividend tax reforms on M-REITs performance
title_sort implications of dividend tax reforms on m-reits performance
publisher Emerald Publishing Limited
publishDate 2017
url http://repo.uum.edu.my/25610/1/JPIF%2035%202%202017%20184%20199.pdf
http://repo.uum.edu.my/25610/
http://doi.org/10.1108/JPIF-11-2016-0087
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score 12.913726