Sponsor Ownership in Asian REITs

Posted: 11 Oct 2017

See all articles by Cheng Keat Tang

Cheng Keat Tang

National University of Singapore (NUS)

Masaki Mori

National University of Singapore

Multiple version iconThere are 2 versions of this paper

Date Written: October 11, 2017

Abstract

This study examines the relationship between sponsor ownership and firm performance proxied by firm value, operating cash flow, and dividend policy with Asian real estate investment trusts (REITs) in Japan, Hong Kong, Malaysia, and Singapore for the period from 2002 to 2012, focusing on both the incentive alignment effect and the entrenchment effect. Our study sheds new light on effective corporate governance for Asian REITs that are prone to agency problems. Such agency problems arise from the inequitable distribution of power to sponsors that results from the external management structure. The findings suggest that larger sponsor ownership aligns the interests of sponsors and minority shareholders and enhances the performance of Asian REITS, while such an effect diminishes as sponsors become more entrenched. We find that the incentive alignment effect and entrenchment effect are primarily driven by developer-sponsored REITs. Also evident is that the presence of institutional investors mitigates agency problems and increases firm performance.

Keywords: Asian REITs; Sponsors; Corporate governance; Ownership structure; Firm value: operating cash flows; Dividend policy; Agency problems

Suggested Citation

Tang, Cheng Keat and Mori, Masaki, Sponsor Ownership in Asian REITs (October 11, 2017). Journal of Real Estate Finance and Economics, Vol. 55, No. 3, 2017, Available at SSRN: https://ssrn.com/abstract=3051376

Cheng Keat Tang

National University of Singapore (NUS) ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228
Singapore

Masaki Mori (Contact Author)

National University of Singapore ( email )

Department of Real Estate
4 Architecture Drive
Singapore, 117566
Singapore

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