Board Independence, Ownership Structure and Performance: Evidence from Real Estate Investment Trusts


DOI: 10.1023/A:1022932326610

Cite this article as:
Ghosh, C. & Sirmans, C.F. The Journal of Real Estate Finance and Economics (2003) 26: 287. doi:10.1023/A:1022932326610


For Real Estate Investment Trusts (REITs), mandatory distribution of income limits free cash flow. But, restrictions on source of income and asset structure result in widely dispersed stock ownership, which makes external monitoring through the takeover market less likely. As such, alternative monitoring mechanisms, including external directors, must be in place to discourage deviant managerial behavior. Using a simultaneous equation system, we conclude that while independent directors enhance REIT performance, the effect is weak. Higher CEO stock ownership and control through tenure and chairmanship of the board reduce the representation by outside directors, and adversely affect REIT performance. Institutional ownership or blockownership fails to serve as alternate disciplining mechanism to (inadequate) monitoring by outside board members, although their presence seems to enhance performance.

corporate performance board structure ownership composition 

Copyright information

© Kluwer Academic Publishers 2003

Authors and Affiliations

  1. 1.Department of Finance and the Center for Real Estate and Urban Economic StudiesUniversity of ConnecticutStorrsUSA

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