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REITs and Their Management: An Analysis of Organizational Structure, Performance, and Management Compensation

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    Abstract

    This study examines possible agency problems in Real Estate Investment Trusts (REITs) by contrasting the performance, structure, and compensation of the two REIT forms from 1987 to 1992. Results show that "self-administered" REITs outperformed "advisor" REITs over the sample period even after adjusting for their greater market risk. Ownership structure significantly influences market performance of advisor REITs; low insider-owned advisor REITs both underperform and take on less market risk than other REITs. Ownership does not affect returns or market risk of self-administered REITs. While advisor compensation and chief executive officer salary appear to be strongly related to size, and chief executive officer salary is related to firm performance, there is only limited evidence that ownership structure affects managerial compensation in either REIT type.

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    File URL: http://aux.zicklin.baruch.cuny.edu/jrer/papers/pdf/past/vol10n03/v10p297.pdf
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    Bibliographic Info

    Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

    Volume (Year): 10 (1995)
    Issue (Month): 3 ()
    Pages: 297-318

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    Handle: RePEc:jre:issued:v:10:n:3:1995:p:297-318

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    Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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    Web page: http://www.aresnet.org/

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    Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
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    Web: http://aux.zicklin.baruch.cuny.edu/jrer/about/get.htm

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    1. Murphy, Kevin J., 1985. "Corporate performance and managerial remuneration : An empirical analysis," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 11-42, April.
    2. Michael E. Solt & Norman G. Miller, 1985. "Managerial Incentives: Implications for the Financial Performance of Real Estate Investment Trusts," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 13(4), pages 404-423.
    3. O'Hara, Maureen, 1981. "Property Rights and the Financial Firm," Journal of Law and Economics, University of Chicago Press, vol. 24(2), pages 317-32, October.
    4. Verbrugge, James A & Jahera, John S, Jr, 1981. "Expense-Preference Behavior in the Savings and Loan Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 13(4), pages 465-76, November.
    5. Golec, Joseph H., 1994. "Compensation policies and financial characteristics of real estate investment trusts," Journal of Accounting and Economics, Elsevier, vol. 17(1-2), pages 177-205, January.
    6. Schmalensee, Richard, 1989. "Inter-industry studies of structure and performance," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 16, pages 951-1009 Elsevier.
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    Cited by:
    1. Patrick Lecomte & Joseph Ooi, 2013. "Corporate Governance and Performance of Externally Managed Singapore Reits," The Journal of Real Estate Finance and Economics, Springer, vol. 46(4), pages 664-684, May.
    2. Nicolas Kohl & Wolfgang Schaefers, 2012. "Corporate Governance and Market Valuation of Publicly Traded Real Estate Companies: Evidence from Europe," The Journal of Real Estate Finance and Economics, Springer, vol. 44(3), pages 362-393, April.
    3. George Cashman & David Harrison & Michael Seiler, 2014. "Advisor Choice in Asia-Pacific Property Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 48(2), pages 271-298, February.
    4. Natalya Delcoure & Ross Dickens, 2004. "REIT and REOC Systematic Risk Sensitivity," Journal of Real Estate Research, American Real Estate Society, vol. 26(3), pages 237-254.
    5. Jamie Alcock & John Glascock & Eva Steiner, 2013. "Manipulation in U.S. REIT Investment Performance Evaluation: Empirical Evidence," The Journal of Real Estate Finance and Economics, Springer, vol. 47(3), pages 434-465, October.
    6. Sirmans, G. Stacy & Sirmans, C. F. & Turnbull, Geoffrey K., 1999. "Prices, incentives and choice of management form," Regional Science and Urban Economics, Elsevier, vol. 29(2), pages 173-195, March.
    7. Minye Zhang & Yongheng Deng, 2008. "REITs Return Behavior and Legal Infrastructure: The 1993 Revenue Reconciliation Act & Inspirations for China's Emerging REITS Market," Working Paper 8532, USC Lusk Center for Real Estate.

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