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Ownership Structure and the Value of the Firm: The Case of REITs

This article examines the relation between ownership structure and firm value as proxied by market-to-book ratios for real estate investment trusts (REITs) over the period 1980 to 1994. Piecewise regression analysis reveals a nonlinear relationship between REIT market-to-book ratios and ownership structure. Low levels of inside ownership are associated with increased market-to-book ratios for equity REITs. However, as inside block ownership rises above 5%, equity REIT market-to-book ratios decline. The opposite result is true for hybrid and mortgage REITs. Similarly, higher levels of outside blockholdings have a negative impact on both equity and hybrid and mortgage market-to-book ratios.

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File URL: http://pages.jh.edu/jrer/papers/pdf/past/vol17n01/v17p071.pdf
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Article provided by American Real Estate Society in its journal Journal of Real Estate Research.

Volume (Year): 17 (1999)
Issue (Month): 1 ()
Pages: 71-90

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Handle: RePEc:jre:issued:v:17:n:1:1999:p:71-90
Contact details of provider: Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
Web page: http://www.aresnet.org/
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Order Information: Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
Web: http://pages.jh.edu/jrer/about/get.htm Email:


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  1. Barclay, Michael J. & Holderness, Clifford G. & Pontiff, Jeffrey, 1993. "Private benefits from block ownership and discounts on closed-end funds," Journal of Financial Economics, Elsevier, vol. 33(3), pages 263-291, June.
  2. Pound, John, 1988. "Proxy contests and the efficiency of shareholder oversight," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 237-265, January.
  3. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
  4. Dennis R. Capozza & Sohan Lee, 1995. "Property Type, Size, and REIT Value," Journal of Real Estate Research, American Real Estate Society, vol. 10(4), pages 363-380.
  5. Demsetz, Harold, 1983. "The Structure of Ownership and the Theory of the Firm," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 375-90, June.
  6. David H. Downs, 1998. "The Value in Targeting Institutional Investors: Evidence from the Five-or-Fewer Rule Change," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(4), pages 613-649.
  7. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
  8. Damodaran, Aswath & Liu, Crocker H, 1993. "Insider Trading as a Signal of Private Information," Review of Financial Studies, Society for Financial Studies, vol. 6(1), pages 79-119.
  9. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-25, June.
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