Institutional Monitoring and REIT CEO Compensation

Posted: 23 Mar 2016

See all articles by Zhilan Feng

Zhilan Feng

Union College

Chinmoy Ghosh

University of Connecticut - Department of Finance

Fan He

Central Connecticut State University

C.F. Sirmans

Florida State University

Multiple version iconThere are 2 versions of this paper

Date Written: May 1, 2010


Our objective in this paper is to investigate the relationship between institutional ownership and CEO compensation structure of REITs. Based on detailed analyses of data on institutional ownership, performance, CEO and board characteristics over the 10 year period 1998–2007, we find significant evidence that large institutions influence governance through CEO compensation — greater institutional ownership is associated with greater emphasis on incentive-based compensation (higher pay-performance sensitivity of CEO compensation), and higher cash and total compensation for CEOs. Further, we find that institutions are less active when managers are performing in a superior fashion. Two important conclusions emerge from the analysis. First, similar to unregulated firms, institutional owners do act as monitors in REITs. Broadly, this result suggests that governance is necessary for REITs. Second, institutional investors set a high pay-performance sensitivity for CEOs, but are willing to pay higher cash compensation to induce managers to take risk.

Suggested Citation

Feng, Zhilan and Ghosh, Chinmoy and He, Fan and Sirmans, C.F., Institutional Monitoring and REIT CEO Compensation (May 1, 2010). Journal of Real Estate Finance and Economics, Vol. 40, No. 4, 2010, Available at SSRN:

Zhilan Feng

Union College ( email )

Schenectady, NY 12308-3151
United States

Chinmoy Ghosh

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States
860-486-3040 (Phone)
860-486-0349 (Fax)

Fan He (Contact Author)

Central Connecticut State University ( email )

1615 Stanley Street
New Britian, CT 06050
United States

C.F. Sirmans

Florida State University ( email )

Tallahasse, FL 32306
United States

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