The value-creation of the business model of Finnish residential REITs as observed through the annual statement : evidence from Orava Residential REIT plc
Hyväri, Sampsa (2017-06-05)
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The thesis evaluates the value creation of the business model of Finnish residential real estate investment trusts (REITs) by observing the annual statement of Orava Residential REIT Plc. for the financial year ending 2016. The theoretical framework discusses peculiarities of REITs, company and its management and financial accounting. Different concepts and aspects have been highlighted in all of the chapters of the theoretical framework. The empirical research is qualitative and done by selective coding. The research method has been abductive. The most important research findings are related to fair value accounting, corporate governance and their role in real estate investment trusts. It seems that fair values are related to all different aspects of the operations of a REIT, the uncertainty related to it possibly enables the management to practice real earnings management. Moreover, unrealized gains and due to the changes in fair values play a significant role in the net income of the company. Considering corporate governance, major concern was raised from the independence of the board of directors. The board has assessed majority of its members to be independent, still, evidence is found to justify that majority of the board members cannot be considered to be truly independent. Also, the cash flows from the realized gains, from the point of view of private investor, have been discussed. More research should be conducted to validate the findings of the research. For example, corporate governance, real earnings manipulation or leverage and capital structure could be inspected more.
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