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Does Real Estate Ownership Matter in Corporate Governance?

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  • Tien Foo Sing
  • C. F. Sirmans

Abstract

Does real estate ownership interact with corporate governance mechanisms in influencing firm performance? Sirmans (1999) hypothesizes that firms with substantial exposure to real estate risks require a different set of governance mechanisms to ensure proper alignment of interest between managers and shareholders. Our empirical tests, using a sample of 228 stocks listed on the Singapore Stock Exchange, show significant variations in governance mechanisms adopted by firms with intensive real estate holdings and other firms, after allowing for interdependence of alternative mechanisms. The results also show that insider ownership is significant and positively related to the Tobin's Q of sample firms. However, when we control for real estate ownership of the sample firms, the effect disappears. We further separate the sample firms into homogeneous clusters based on their corporate governance mechanisms, and test the relationship between governance and firm performance. We find significant positive interactive effects of real estate ownership and clustering of firms and their stock market abnormal returns. The stock market responds favourably to real estate holdings of firms that are not subject to shareholder voting problems. The empirical results do not reject the Sirmans hypothesis.

Suggested Citation

  • Tien Foo Sing & C. F. Sirmans, 2007. "Does Real Estate Ownership Matter in Corporate Governance?," Journal of Property Research, Taylor & Francis Journals, vol. 25(1), pages 23-43, September.
    • Handle: RePEc:taf:jpropr:v:25:y:2007:i:1:p:23-43
    DOI: 10.1080/09599910802397065
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    1. repec:mth:ijafr8:v:8:y:2018:i:4:p:1-21 is not listed on IDEAS
    2. Rekha Pillai & Husam-Aldin N. Al-Malkawi & M. Ishaq Bhatti, 2021. "Assessing Institutional Dynamics of Governance Compliance in Emerging Markets: The GCC Real Estate Sector," JRFM, MDPI, vol. 14(10), pages 1-18, October.
    3. Yonekura, Akira & Gallhofer, Sonja & Haslam, Jim, 2012. "Accounting disclosure, corporate governance and the battle for markets: The case of trade negotiations between Japan and the U.S," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 23(4), pages 312-331.
    4. Gang-Zhi Fan & Zsuzsa R. Huszar & Weina Zhang, 2016. "The Helping Hand of the State in Chinese Real Estate Firms: Anti-corruption and Liberalization," International Real Estate Review, Global Social Science Institute, vol. 19(1), pages 51-97.
    5. Kazemian, Soheil & Djajadikerta, Hadrian Geri & Said, Jamaliah & Roni, Saiyidi Mat & Trireksani, Terri & Alam, Md. Mahmudul, 2021. "Corporate governance, market orientation and performance of Iran's upscale hotels," OSF Preprints ajmvn, Center for Open Science.

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