Dividends, Values and Agency Costs in REITs

Posted: 21 Dec 2012

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: 2012

Abstract

This study examines the market value of REIT dividends conditional on transparency of operating structure and effectiveness of boards. Results suggest that total, mandatory and discretionary dividends are valued by the market. Consistent with agency cost theory, results provide some evidence that discretionary dividends paid by REITs with greater principal-agent conflicts have greater market value. Specific results suggest an increased value of excess dividends paid by firms with more complex organizational structures (UPREITs) and, to some degree, less independent boards. This evidence implies the equity market recognizes REITs substitution of discretionary dividends for stronger governance.

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

Suggested Citation

Chou, Wen-Hsiu and Hardin, William G. and Hill, Matthew D. and Kelly, Gary Wayne, Dividends, Values and Agency Costs in REITs (2012). Journal of Real Estate Finance and Economics, Vol. 46, No. 1, 2013, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2192143

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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