Dividends, Values and Agency Costs in REITs

Journal of Real Estate Finance and Economics, Forthcoming

35 Pages Posted: 17 Sep 2009 Last revised: 28 Mar 2011

See all articles by Julia Chou

Julia Chou

Florida International University

William G. Hardin

Florida International University (FIU) - College of Business Administration

Matthew D. Hill

Arkansas State University

G. W. Kelly

University of Southern Mississippi; Mississippi State University - Department of Finance and Economics

Date Written: March 24, 2011

Abstract

This study examines the market value of total, mandatory, and discretionary REIT dividends and supports dividend relevance. Consistent with agency cost theory, the results show dividends paid by REITs with greater potential agency conflicts have greater market value. Discretionary dividends paid by REITs with greater cash flow, using an UPREIT structure, and having less independent boards are more highly valued. These results support a strategy of large distributions since the market recognizes and rewards the substitution of dividends for stronger corporate governance structures.

Keywords: dividends, agency costs, market value, governance, reits

Suggested Citation

Chou, Wen-Hsiu and Hardin, William G. and Hill, Matthew D. and Kelly, Gary Wayne, Dividends, Values and Agency Costs in REITs (March 24, 2011). Journal of Real Estate Finance and Economics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1474841

Wen-Hsiu Chou

Florida International University ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

William G. Hardin (Contact Author)

Florida International University (FIU) - College of Business Administration ( email )

Miami, FL 33199
United States

Matthew D. Hill

Arkansas State University ( email )

2713 Pawnee
P.O. Box 1750
Jonesboro, AR 72467-115
United States

Gary Wayne Kelly

University of Southern Mississippi ( email )

118 College Drive
#5076
Hattiesburg, MS 39406
United States
601 266 4959 (Phone)
601 266 6110 (Fax)

Mississippi State University - Department of Finance and Economics ( email )

Mississippi State, MS 39762
United States

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