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Corporate Real Estate Intensity in the Indonesian Public Listed Banks and the Impact on Profitability Measured by Economic Value Added (EVA) and Market Value Added (MVA)

One of our partners just completed his master's in real estate! Align with our interest to enlighten the real estate stakeholders in Indonesia, he has agreed to share his dissertation and open it to the public. You may read the abstract below while the full document in PDF is available for download. Just click the link below!

Many studies around the world have well documented the significance of Corporate Real Estate (CRE) in modern firms where it often perceived as ‘latent assets.’ Higher Corporate Real Estate Intensity (CREI) in a firm has been associated negatively with the shareholders’ wealth and profitability. This research is interested with CREI in Indonesian public listed banks, comparing them against global benchmarks, and determining the impact on the value creation. Empirical research, with the application of the quantitative method using multivariate panel data regression and supported by literature review, is the strategy implemented in this research. Research findings show that the Indonesian public listed banks appear to have higher CREI than the global benchmarks, and generally, the banking sector exhibits lower CREI than the other industries. Evidence from 41 Indonesian public listed banks in the 2014–2018 period shows that CREI has negatively impacted the corporate performance under economic value added (EVA) metrics, although not the market value added (MVA) metric. CRE and corporate performance between public listed state-owned enterprise (SOE) and non-SOE banks also found to be similar. This research suggests that managers in the Indonesian public listed banks to act and re-evaluate their CRE strategy. Annual revaluation of CRE assets is strongly recommended to reflect the banks’ actual condition better. Future studies are encouraged to expand into another industry to map and uncover the CRE aspect of Indonesian firms fully. Consistencies, using the same parameters as previous studies, and an extended period of samples is imperative for future studies.

Keywords: Indonesia, corporate real estate, real estate asset intensity, economic value added, market value added

Author: Restaditya Harris

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