THE DETERMINANTS OF ORGANIZATIONAL FORM CHANGES - EVIDENCE AND IMPLICATIONS FROM REAL-ESTATE

We study changes in the real estate industry among organizational form s with varying degrees of restrictiveness and document the associated changes in profitability, free cash flow, debt, dividends, and investm ent policies. All troubled firms in our sample move to a more flexibil e organizational structure, with subsequent reductions in dividends, i mprovements in performance, and increases in asset sales and investmen ts. Healthy firms that move to a tighter structure have larger free ca sh flows before the change; they increase dividends, reduce free cash flows and improve profitability after the change. We document evidence of tax considerations in organizational changes.