Managerial Style and Firm Value

Dennis Capozza and Paul J. Seguin

Real Estate Economics, 1998, vol. 26, issue 1, 131-150

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.

Date: 1998
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