The value in targeting institutional investors: Evidence from the five-or-fewer rule change

This article examines a recent relaxation in the ownership qualifications f or real estate investment trusts that is popularly referred to as the five- or-fewer rule change. The motivation for this rule change leads to an analo gy between the ownership change process and an industry-wide investor targe ting strategy The findings reveal a significant wealth effect based on the targeting strategy; however, there is no evidence to suggest this heterogen eous effect was intended. In addition, the targeted investors' ex post trad ing behavior is linked directly to the targeting strategy. These findings s upport the value-based strategy of targeting institutional investors where, in this case, value creation is associated with the increased concentratio n of a dispersed base of sophisticated investors.