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Managerial Style and Firm Value

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  • Dennis R. Capozza
  • Paul J. Seguin

Abstract

This study analyzes the effect of managerial style on firm value by partitioning general and administrative (G&A) expenses in the real estate investment trust industry into a nondiscretionary “structural” component associated with the costs of asset and liability management and a discretionary or “style” component. The discretionary component is significantly related to at least one measure of style—specifically, the portfolio focus/diversification of the firm. Gross (project‐level) cash flows are invariant to the nondiscretionary or structural component of G&A but are positively related to the style component of G&A. The structural component has a negative impact on share price while the style component has a neutral impact. Therefore, for this industry, creating larger, less‐levered firms would result in enhanced value.

Suggested Citation

  • Dennis R. Capozza & Paul J. Seguin, 1998. "Managerial Style and Firm Value," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(1), pages 131-150, March.
    • Handle: RePEc:bla:reesec:v:26:y:1998:i:1:p:131-150
    DOI: 10.1111/1540-6229.00741
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    Cited by:

    1. Zhilan Feng & Maneechit Pattanapanchai & S. McKay Price & C. F. Sirmans, 2021. "Geographic diversification in real estate investment trusts," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(1), pages 267-286, March.
    2. Ambrose, Brent W. & Fuerst, Franz & Mansley, Nick & Wang, Zilong, 2019. "Size effects and economies of scale in European real estate companies," Global Finance Journal, Elsevier, vol. 42(C).
    3. Xiaoling Chu & Chiuling Lu & Desmond Tsang, 2021. "Geographic Scope and Real Estate Firm Performance during the COVID-19 Pandemic," JRFM, MDPI, vol. 14(7), pages 1-16, July.
    4. Andrea Pulcini & Damiano Montani & Daniele Gervasio, 2022. "Trusts in Business Research: A Concise Systematic Literature Review," International Business Research, Canadian Center of Science and Education, vol. 15(8), pages 1-20, August.
    5. Bing Zhu & Stanimira Milcheva, 2020. "The Pricing of Spatial Linkages in Companies’ Underlying Assets," The Journal of Real Estate Finance and Economics, Springer, vol. 61(3), pages 443-475, October.
    6. Kuang-Liang Chang & Nan-Kuang Chen & Charles Leung, 2011. "Monetary Policy, Term Structure and Asset Return: Comparing REIT, Housing and Stock," The Journal of Real Estate Finance and Economics, Springer, vol. 43(1), pages 221-257, July.
    7. James C. Brau & Andrew Holmes, 2006. "Why Do REITs Repurchase Stock? Extricating the Effect of Managerial Signaling in Open Market Share Repurchase Announcements," Journal of Real Estate Research, American Real Estate Society, vol. 28(1), pages 1-24.
    8. Hsuan-Chi Chen & Robert Fok & Chiuling Lu, 2011. "An Analysis of Lockups in REIT IPOs," The Journal of Real Estate Finance and Economics, Springer, vol. 43(3), pages 359-384, October.
    9. Randy Anderson & Justin Benefield & Matthew Hurst, 2015. "Property-type diversification and REIT performance: an analysis of operating performance and abnormal returns," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 39(1), pages 48-74, January.
    10. Michael J. Highfield & Lily Shen & Thomas M. Springer, 2021. "Economies of Scale and the Operating Efficiency of REITs: A Revisit," The Journal of Real Estate Finance and Economics, Springer, vol. 62(1), pages 108-138, January.
    11. Cheng-Wen Lee & Shu-Hen Chiang & Zhong-Qin Wen, 2023. "Pursuing the Sustainability of Real Estate Market: The Case of Chinese Land Resources Diversification," Sustainability, MDPI, vol. 15(7), pages 1-19, March.
    12. David C. Ling & Andy Naranjo & Benjamin Scheick, 2021. "There is no place like home: Information asymmetries, local asset concentration, and portfolio returns," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(1), pages 36-74, March.
    13. Yongheng Deng & Maggie (Rong) Hu & Anand Srinivasan, 2017. "Information Asymmetry and Organizational Structure: Evidence from REITs," The Journal of Real Estate Finance and Economics, Springer, vol. 55(1), pages 32-64, July.
    14. Kerstin Lopatta & Thomas Kaspereit & Laura‐Maria Gastone, 2020. "Managerial style in cost asymmetry and shareholder value," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(5), pages 800-826, July.
    15. Rakesh Kumar Sharma, 2021. "Factors influencing dividend decisions of Indian construction, housing and real estate companies: An empirical panel data analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5666-5683, October.
    16. James Chong & Alexandra Krystalogianni & Simon Stevenson, 2012. "Dynamic correlations between REIT sub-sectors and the implications for diversification," Applied Financial Economics, Taylor & Francis Journals, vol. 22(13), pages 1089-1109, July.
    17. Mine Ertugrul & Erasmo Giambona, 2011. "Property Segment and REIT Capital Structure," The Journal of Real Estate Finance and Economics, Springer, vol. 43(4), pages 505-526, November.
    18. Bing Zhu & Colin Lizieri, 2024. "Local Beta: Has Local Real Estate Market Risk Been Priced in REIT Returns?," The Journal of Real Estate Finance and Economics, Springer, vol. 69(4), pages 682-718, November.
    19. Joseph T.L. Ooi, 2010. "The compensation structure of REIT managers: impact on stock valuation and performance," Journal of Property Research, Taylor & Francis Journals, vol. 26(4), pages 309-328, May.

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