Investor Protection, Corporate Governance and Firm Performance: Evidence from Asian Real Estate Investment Trusts

This study aims to investigate the impact of investor protection on Asian REITs valuation and performance. The relationship between investor protection and corporate governance mechanisms, namely board independence, concentrated ownership by outside blockholders and sponsors are also examined in this study. The sample consists of 317 firm year observations from 57 REITs across Japan, Singapore, Hong Kong and Malaysia with 10 years period between 2002 and 2012. The findings show that REIT with stronger investor protection is associated with higher firm valuation. Investor protection, however, is found to have only a weak positive effect on REIT performance. The results further reveal that investor protection can be a substitute to a weak level of board independence, but not vice versa. The results also suggest that investor protection serves as a complement to the monitoring of outside blockholder. More importantly, there is no evidence that REIT sponsors expropriate unitholders' wealth when there is a weak investor protection in place. Overall, the findings show that Asian REIT unitholders are generally protected, with an average score of 14 out of 18. However, there is still room for improvement to foster an investor confidence to facilitate the development of the Asian REIT market in the future.