Unexpected Inflation, Capital Structure, and Real Risk-adjusted Firm Performance

Jamie Alcock, Eva Steiner

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

Managers can improve real risk-adjusted firm performance by matching nominal assets with nominal liabilities, thereby reducing the sensitivity of real risk-adjusted returns to unexpected inflation. The net asset value of US equity real estate investment trusts (REITs) serves as a good proxy for nominal assets and, accordingly, we use a sample of US REITs to test our hypothesis. We find that for the firms in our sample: (i) their real risk-adjusted performance, and (ii) their inflation-hedging qualities are inversely related to deviations from this ‘matching-nominals’ argument. In addition to providing managers with a vehicle to maximize real risk-adjusted performance, our findings also provide investors with the tools to infer inflation-hedging qualities of equity investments.

Original languageEnglish (US)
Pages (from-to)273-298
Number of pages26
JournalAbacus
Volume53
Issue number2
DOIs
StatePublished - Jun 2017

All Science Journal Classification (ASJC) codes

  • Accounting

Fingerprint Dive into the research topics of 'Unexpected Inflation, Capital Structure, and Real Risk-adjusted Firm Performance'. Together they form a unique fingerprint.

Cite this