Corporate Governance and International Investment: Evidence from Real Estate Holdings

Abstract

The foreign direct investment (FDI) literature documents that higher quality governance, at both the national level and the firm level, is associated with a greater likelihood to invest abroad and to take larger stakes when investing abroad. We examine a unique set of international real estate holdings and corporate governance data to evaluate the comparability of real estate investment to FDI more broadly. Our results at both the national and firm level indicate that real estate transactions differ fundamentally from other types of FDI. Specifically, property nation corporate governance, real estate firm headquarter nation corporate governance, and firm level governance are negatively associated with the propensity to invest across borders. Further, firm level corporate governance is negatively related to the stake acquired in foreign property investment. The firm level results appear to be driven largely by non-U.S. firms. Overall, these results are counter to the more general FDI literature.

Keywords: Corporate Governance, Real Estate Investment, International Real Estate, Foreign Investment

JEL Classification: F21, G11, G23, O16, O18, P52