The information content of funds from operations (FFO) for real estate investment trusts (REITs)

This paper examines the information content of alternative summary performance measures, using stock returns as the benchmark, for 138 REITs during 1994-1996. This payer tests for both incremental and relative information content of FFO (a voluntarily disclosed, accounting-based performance measure that is the industry standard for REITs) compared to GAAP net income (EPS), cash from operations, and earnings before interest, taxes, depreciation and amortization. Results indicate that both FFO and EPS consistently provide incremental information content with only weak evidence that EPS has greater relative information content and no evidence for the other summary performance measures. (C) 1999 Elsevier Science B.V. All rights reserved. JEL classification: G29; L85; M4.