Corporate governance and performance of REITs

Jayalakshmy Ramachandran, Khoo Kok Chen, Ramaiyer Subramanian, Ken Kyid Yeoh and Kok Wei Khong

Managerial Auditing Journal, 2018, vol. 33, issue 6/7, 586-612

Abstract: Purpose - This study aims to investigate the relationship between corporate governance (CG) and performance of Real Estate Investment Trust (REITs) in Singapore and Malaysia. Design/methodology/approach - The CG attributes that contribute best toward R-Index scores are tested followed by analysis of whether R-Index scores contribute toward better performance of the REITs when controlled for growth, firm size and leverage. Regression analysis using structured equation modeling (SEM) is instituted. Findings - All attributes in the R-Index except management ownership are significantly correlated to R-Index. Regression analysis using SEM reveals that all the three measures of performance are significant. When controlled for growth and firm size, CG mechanisms reduce the impact of losses. However, highly levered firms could be risky for investors despite strong CG mechanisms. Research limitations/implications - All S-REITs and M-REIT sampled were grouped as one regardless of the country differences, which may have limited the results and findings. The R-Index used to score the CG practices for Asia is still very new. Practical implications - Findings of the study will help REIT policymakers to update scorecards frequently. Loss-making REITs must emphasize on specific CG attributes to enhance their overall CG scores to gain market confidence and procure financial assistance through better disclosure. Originality/value - Due to research scarcity on CG effectiveness associated with performance of Asian REITs after the global financial crisis, this study comes as a timely contribution in understanding the relationship between CG and performance of REITs.

Keywords: Performance; Corporate governance; Shareholders; Real estate investment; R-Index (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eme:majpps:maj-09-2016-1445

DOI: 10.1108/MAJ-09-2016-1445

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