Do Management Changes Matter? An Empirical Investigation of REIT Performance

Abstract

Management's (board of directors or executive officers) contribution to a firm is difficult to directly observe, although stock return performance can be a source of information. This study addresses this issue by extending the work of McIntosh, Rogers, Sirmans and Liang (1994) by analyzing management changes within REITs from 1984 to 2002. The findings indicate a significant relationship between negative performance and a management change from a period three months prior to the change in management. Logit and probit analysis are used to determine whether negative firm performance (measured by its relationship to market returns) can predict the likelihood of a management change. No predictive ability is found.

This paper received the award for the best paper on Real Estate Investment Trusts [sponsored by the National Association of Real Estate Investment Trusts (NAREIT)] presented at the 2004 ARES Annual Meeting.

Keywords: stock return, REIT, performance, logit, probit

JEL Classification: L85,R11,R38,P51,P43,O16,M19,L98,L85,L20,G32,D21