How Important is the Board of Directors to REIT Performance?

Zhilan Feng, Chinmoy Ghosh and C. F. Sirmans

Journal of Real Estate Portfolio Management, 2005, vol. 11, issue 3, 281-293

Abstract: Executive Summary. With the emergence of the “new” real estate investment trusts (REITs) over the last decade, the question of corporate governance is of particular interest to investors and managers of REIT portfolios. This paper analyzes the structure of the board of directors for a sample of REITs and examines the relationship between board structure and REIT performance. A board index is constructed that assigns higher scores to boards with good governance—small size, majority outside directors, and not chaired by the CEO. The findings indicate that while good boards are associated with superior average performance, the effect is significant only for the best and worst boards. For firms where the management appears to have traded off positive board attributes against their power and influence on the board, the net effect on performance is insignificant.

Date: 2005
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DOI: 10.1080/10835547.2005.12089731

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