Review Reports - Predicting the REIT Corporate Life Cycle Phase on a Financial Accounting Basis

Round 1

Reviewer 1 Report

Key comments are as follows:

- The author should explain the rationale for the chosen period: 2006-2023.

- The author should explain why he embarked on the chosen methodological framework including the rationale for the model used. What are the strengths and limitations of the model? Which earlier studies considered such a model? What were the findings?

- How did the model as well as the results overcome the fact that the sample is driven by Spanish companies? Also. the author should explain what is SOCIMIs?

- There are no model diagnostic tests, nor any attempt to address potential breaks in the data (Global Financial Crisis, Covid-19).

-In line 219, the positive sign on the leverage ratio needs further analysis. Which are the studies which find that positive leverage throughout the entire life cycle?

- Same with the negative sign on sales. How the sign is explained in the birth and shake-out stage?

Acceptable use of English. Good readability.

Author Response

I would like to thank the referee for carefully reading the manuscript and providing many useful comments and suggestions. I feel that the comments of the referee have helped to improve the exposition of the paper and to provide a much better economic interpretation of the empirical results. Please see below the replies to the referee’s comments. Please also note that the revised version of the manuscript includes the comments of the rest of the reviewers, as well.

Response to Reviewer 1

Comment 1

The author should explain the rationale for the chosen period: 2006-2023.

Response

In the revised version of the paper, in the data description section (lines 230-235), the above point is now being clarified.

Comment 2

The author should explain why he embarked on the chosen methodological framework including the rationale for the model used. What are the strengths and limitations of the model? Which earlier studies considered such a model? What were the findings?

Response

In the revised version of the paper, a literature review section is being added, addressing the above points. With respect to the reasons embarking the specific methodological framework – the strengths and limitations of the model (lines 96 -125) and regarding earlier studies considering such a model and findings (lines 133-147).

Comment 3

How did the model as well as the results overcome the fact that the sample is driven by Spanish companies? Also. the author should explain what is SOCIMIs?

Response

In the revised version of the paper, in the discussion - alternative model specifications section, an additional model with a dataset that excludes the SOCIMIs is also considered to assess whether the (baseline model) sample is driven by the Spanish REITs (line 421). .

Comment 4

There are no model diagnostic tests, nor any attempt to address potential breaks in the data (Global Financial Crisis, Covid-19).

Response

In the revised version of the paper the Cumulative sum (CUSUM) test and the CUSUM of squares (CUSUMQ) is used to test the structural stability of the model (lines 266-276) .

Last comments

In line 219, the positive sign on the leverage ratio needs further analysis. Which are the studies which find that positive leverage throughout the entire life cycle?

Same with the negative sign on sales. How the sign is explained in the birth and shake-out stage?

Response

A literature review section has been added that discusses the above points. Additional references are also included for the results in the discussion section.

Reviewer 2 Report

The paper is interesting but has some aspects that need to be addressed:

- The cited literature in the Introduction is very old. The authors claim that their paper is the first article that deals with this topic. This is not correct. The authors have not provided a proper literature review, and this is a major weakness of the paper. For example, check these papers: https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&q=capital+structure+company+life+cycle&btnG=

- Any empirical paper needs to include adequate hypotheses. These are missing in the present paper. Therefore, we do not know what the paper needs to demonstrate, also because the literature review is missing.

- The models are not presented, as equations.

- The justification of these models is not presented, in relation to the literature. To say that there is no previous literature is not acceptable.

- The classification of life cycle stages is not clear in Table 1, which is badly formatted.

- Figure 1 can be a table, it is not necessary to fill half a page.

- Leverage or dividend yield do not "predict" the life cycle stage. These are part of the life cycle stage. It is important to understand that life cycle is an abstract concept (a construct), and that the leverage etc. are financial indicators which describe the financial structure and performance of the company. Therefore, the life cycle stage is not a consequence of leverage, sales etc., but a construct that encompasses several aspects of financial performance and financial structure.

- The Conclusions should include: the contribution, the importance of the results, the implications and usefullness for companies and investors, the limitation of the study, the future avenues of research. At this moment, the conclusions are underdeveloped.

At this point, the paper as a whole needs a substantial revision before it becomes a good article.

It is acceptable.

Author Response

Response to Reviewer 2

Comment 1

The cited literature in the Introduction is very old. The authors claim that their paper is the first article that deals with this topic. This is not correct. The authors have not provided a proper literature review, and this is a major weakness of the paper. For example, check these papers: https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&q=capital+structure+company+life+cycle&btnG=

Response

In the revised version of the paper, a literature review section is now being added.

Comment 2

Any empirical paper needs to include adequate hypotheses. These are missing in the present paper. Therefore, we do not know what the paper needs to demonstrate, also because the literature review is missing.

Response

In the revised version of the paper, a hypothesis development section is now being added.

Comment 3

The models are presented, as equations, in the revised version of the manuscript.

Response

All models are now presented as equations, in the revised version.

.Comment 4

The justification of these models is not presented, in relation to the literature. To say that there is no previous literature is not acceptable.

.Response

The justification of the models is now presented in relation to the literature, the revised version includes a literature review section.

Comment 5

The classification of life cycle stages is not clear in Table 1, which is badly formatted.

Response

Table 1 is being reformatted, in the revised version, to be clearer to the reader.

Comment 6

Figure 1 can be a table, it is not necessary to fill half a page.

Response

Figure 1 has been excluded from the revised version of the manuscript, and information regarding the frequency of observations (% share) at each life cycle phase is now included in a Table (1) .

Comment 7

The Conclusions should include: the contribution, the importance of the results, the implications and usefullness for companies and investors, the limitation of the study, the future avenues of research. At this moment, the conclusions are underdeveloped.

Response

The conclusion of the revised version now includes the contribution, the importance of the results, the implications and usefullness for companies and investors, the limitation of the study and the future avenues of research

Reviewer 3 Report

Dear Author,

first of all let me praise you for your interesting manuscript. It addresses a relevant and intriguing topic, namely the predictability of the stage of the lifecycle by the means of accounting variables.

Despite the clarity (just a few minor misspells exist) and the methodological efforts (the model is well presented, justified and supported by the robustness checks), some concerns still exist.

At first, in line 29-31 it is not clear what you mean by saying "However, the determinants of stock performance and future profitability do not mean – revert when firms are classified by their corporate life cycle phase (Dickinson, 2011)". I suggest clarifying the point.

Furthermore, you adopt yearly data from Datastream concerning 130 publicly listed REITs. Why do you concentrate on real estate? In the same time, the timeframe of your analysis spans from 2006 to 2023. However, the overall data are just 1291. How do you justify this issue? Is it just a matter of missing data or a statistical treatment?

In addition, it sounds a bit strange the average value as well as the distribution of the ROE in Table 2, with a mean value of 4.6%.

Concerning the Empirical results, the R-Squared around 6% is a signal of potential misspecification of the empirical model, despite including 6 controls. In this sense, I suggest including the REIT age as a control variable: despite being the age not fully tied to the corporate lifecycle stage, this can for sure account for it.

Lastly, I recommend including references for all the results in the Discussion section.

Good luck as you keep on working on your interesting manuscript

Best regards

The language is clear, the content is well exposed and just minor misspells exist.

Author Response

Response to Reviewer 3

Comment 1

At first, in line 29-31 it is not clear what you mean by saying "However, the determinants of stock performance and future profitability do not mean – revert when firms are classified by their corporate life cycle phase (Dickinson, 2011)". I suggest clarifying the point.

Response

In the revised version of the paper, in the introduction section (line 28-33), the above point is now being clarified.

Comment 2

Response

In the revised version of the paper, in the data description section (lines 236-239), further details about data development are provided.

Comment 3

Response

In the revised version of the paper, in the discussion - alternative model specifications section, an additional model with an additional control variable which accounts for the REIT age is also considered (line 421).

Comment 4

In addition, it sounds a bit strange the average value as well as the distribution of the ROE in Table 2, with a mean value of 4.6%.

.Response

With respect to the average ROE of the selected European REITs, the summary statistics of the data sample derived provides an average ROE of 4.6%. Regarding this query, the reviewer may be also advised by the ERPA public reports, i.e ‘’According to ERPA The 5-year average yield of listed real estate companies within the FTSE EPRA Nareit Developed Europe REITs Index is 4.7% (as at June 30, 2021) ( https://prd.epra.com/about-us/about-listed-real-estate/investing-listed-real-estate#:~:text=The%205%2Dyear%20average%20yield,at%20June%2030%2C%202021).

Comment 5

Lastly, I recommend including references for all the results in the Discussion section.

Response

Done. Also a literature review section is included in the manuscript.

Author Response File: Author Response.docx

Round 2

Reviewer 1 Report

Comments have been dealt with in an acceptable manner.

Author Response

Dear referee,

Thank you indeed for the comments and suggestions, that certainly improved the paper. Please note that the revised version (2^nd round) of the manuscript includes the comments of the rest of the reviewers, as well.

Reviewer 2 Report

Tha paper has clearly improved!

The authors should add a paragraph in the Conclusions regarding the implications / significance / importance / value of the present study, for different categories of stakeholders of the firm.

The use of some words is not appropriate, for example "sorted" as on lines 487-499, should be "classified".

CLASSIFY Synonyms: 72 Synonyms & Antonyms for CLASSIFY | Thesaurus.com

Author Response

Dear referee,

Thank you indeed for the comments and suggestions that certainly improved the paper. Please note that the revised version (2^nd round) of the manuscript includes the comments of the rest of the reviewers, as well.

Response to Reviewer 2

Comment 1

The authors should add a paragraph in the Conclusions regarding the implications / significance / importance / value of the present study, for different categories of stakeholders of the firm.

Response

In the revised version of the paper, a paragraph regarding the implications / significance / importance / value of the present study, for different categories of stakeholders of the firm, is now being added in the conclusion section.

Comment 2

The use of some words is not appropriate, for example "sorted" as on lines 487-499, should be "classified".

Response

Done.

Reviewer 3 Report

Dear Author,

first of all let me praise you again for your manuscript. It is very interesting and addresses a narrow, but existing, gap in the literature, namely the predictability of the stage of the lifecycle by the means of accounting variables.

I particularly praise your clarity, with just a few minor misspells as well as the strong methodological efforts. At this stage, with the further inclusions, your model is very well presented, justified and supported by the robustness checks.

You have integrated at line 29-31 the unclear sentence that introduced your manuscript. I feel something can still be done, but now it is a bit more clear what you mean.

It is a pity that you lose so many observations due to missing data, and I would recommend specifying the methodological guidelines you adopted to exclude outliers, it would help the development of your manuscript.

The report you mentioned is not so adequate in justifying the average value of the ROE. I get your point, it is just statistics that speaks. However it is something not fully comprehensible.

Good luck with the future of your intriguing manuscript

Best regards

The language is clear, the content is well exposed.

Author Response

Dear referee,

Response to Reviewer 3

Comment

Response

In the revised version of the paper, a paragraph specifying the methodological guidelines adopted to exclude outliers is now being added.