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Do Internally Managed Reits Manage Earnings More Than Externally Managed Reits?

Author

Listed:
  • Oluwaseun Damilola Ajayi
  • Omokolade Akinsomi

Abstract

Purpose – The purpose of the paper was to provide an empirical examination of earnings management among internally and externally managed REITs. The empirical accounting literature claims that internal management of a firm does not constrain earnings management, while others argue in favour of internal management for firms. Design/methodology/approach – Using a sample of listed South African REITs for the 2013 - 2021 time period, we examine the relationship between management structures and earnings management. Findings – We do not find any aggressive practice in internally managed REITs during the study period. Practical implications – The study's findings imply that good corporate governance is a critical safeguard for stakeholders in exceptional circumstances when REITs have special incentives to manage earnings; as a result, it is suggested that REITs' corporate governance is important, despite being overlooked in some circumstances. Specific to South African REITs, policymakers as well as nominating committees of the board of directors may wish to take note that financial competence is an important quality of external directors in order to effectively curb earnings management. Originality/value – This is the first study to investigate financial sheet manipulation among REITs management structures in an emerging market.

Suggested Citation

  • Oluwaseun Damilola Ajayi & Omokolade Akinsomi, 2022. "Do Internally Managed Reits Manage Earnings More Than Externally Managed Reits?," AfRES 2022-043, African Real Estate Society (AfRES).
    • Handle: RePEc:afr:wpaper:2022-043
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Earnings Management; Emerging Markets; REITs; Discretionary Accruals;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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