Är Due Diligence effektivt för transaktioner med kommersiella fastigheter?: En studie om hantering av asymmetrisk information
2019 (Swedish)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE credits
Student thesisAlternative title
Is Due Diligence Efficient for Transactions with Commercial Properties? : A Study About Handling Asymmetric Information (English)
Abstract [en]
The technical progress have contributed to increased information availability on many markets. However, the progress has not reached the commercial real estate market. To reduce the seller’s information acquisition in commercial real estate transactions, a special inspection process is used by the sales object, called Due Diligence. The purpose is to analyze the efficiency of a Due Diligence in a transaction with commercial real estate in Sweden, to illustrate the problems of handling asymmetric information. The study is mainly based on a qualitative method, but also on a quantitative method. The qualitative method is based on 9 semistructured interviews with people working with Due Diligence and on the market for commercial real estate. The quantitative method is based on a literature study with publications from real estate companies and previous studies on the field. To measure efficiency, we compare benefits with costs through an economics perspective. In addition, theories regarding asymmetric information are applied on the subject, which are principalagent, moral hazard, adverse selection and transaction costs. The results show that Due Diligence contributes to reduced information asymmetry for the seller on the market, because of sharing information and also being cooperative during the process. The benefits of Due Diligence is to gain understanding of the property, to avoid risks and to identify possibilities. The benefits can be measured through price reductions, improved contract terms and through the alternative cost of the benefit. The transaction costs are relatively higher at lower prices of purchases than at higher prices of purchases. There is a fixed cost for Due Diligence, but also a variable part depending on the price, size of transaction, complexity, information transparency and seller experience. The main principles for managing asymmetric information are 1) that sellers and buyers work together to fill information gaps and 2) that new discoveries are addressed through negotiations. Suggestions for markets that can follow the principles may be secondary markets for boats, cars and machines. Finally, Due Diligence can be stated to be an effective process.
Place, publisher, year, edition, pages
2019. , p. 53
Keywords [en]
Due Diligence, asymmetric information, commercial real estate, efficiency
Keywords [sv]
Due Diligence, asymmetrisk information, kommersiella fastigheter, effektivitet
National Category
Economics
Identifiers
URN: urn:nbn:se:liu:diva-160257ISRN: LIU-IEI-FIL-G--19/02102--SEOAI: oai:DiVA.org:liu-160257DiVA, id: diva2:1351180
Subject / course
Bachelor Thesis in Economics
Supervisors
Examiners
2019-09-162019-09-132019-09-16