Corporate Governance and Performance: the REIT Effect
AbstractREITs offer a natural experiment in corporate governance due to the fact that they leave little free cash flow for management, which reduces agency problems. We exploit a unique and leading corporate governance database to test whether corporate governance matters for the performance of U.S. REITs. We document for a sample including governance ratings of more than 220 REITs that firm value is significantly related to firm-level governance for REITs with low payout ratios only. Repeating the analysis with the complete database that includes more than 5,000 companies, and a control sample of firms with high corporate real estate ratios, we find a strong and significantly positive relation between our governance index and several performance variables, indicating that the partial lack of a relation between governance and performance in the real estate sector might be explained by a REIT effect.
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Bibliographic InfoPaper provided by University of Pennsylvania, Wharton School, Weiss Center in its series Working Papers with number 08-3.
Date of creation: Mar 2008
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Other versions of this item:
- Rob Bauer & Piet Eichholtz & Nils Kok, 2010. "Corporate Governance and Performance: The REIT Effect," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(1), pages 1-29.
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
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- NEP-ALL-2008-08-31 (All new papers)
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- Paul Anglin & Robert Edelstein & Yanmin Gao & Desmond Tsang, 2013. "What is the Relationship Between REIT Governance and Earnings Management?," The Journal of Real Estate Finance and Economics, Springer, vol. 47(3), pages 538-563, October.
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