Journal of Business Ethics

, Volume 147, Issue 3, pp 651–667 | Cite as

Can Institutional Investors Bias Real Estate Portfolio Appraisals? Evidence from the Market Downturn

  • Neil Crosby
  • Steven DevaneyEmail author
  • Colin Lizieri
  • Patrick McAllister


This paper investigates the extent to which institutional investors may have influenced independent real estate appraisals during the financial crisis. A conceptual model of the determinants of client influence on real estate appraisals is proposed. It is suggested that the extent of clients’ ability and willingness to bias appraisal outputs is contingent upon market and regulatory environments (ethical norms and legal and institutional frameworks), the salience of the appraisal(s) to the client, financial incentives for the appraiser to respond to client pressure, organisational culture, the level of moral reasoning of both individual clients and appraisers, client knowledge and the degree of appraisal uncertainty. The potential of client influence to bias ostensibly independent real estate appraisals is examined using the opportunity afforded by the market downturn commencing in 2007 in the UK. During the market turbulence at the end of 2007, the motivations of different types of owners to bias appraisals diverged clearly and temporarily provided a unique opportunity to assess potential appraisal bias. We use appraisal-based performance data for individual real estate assets to test whether there were significant ownership effects on performance during this period. The results support the hypothesis that real estate appraisals in this period reflected the differing needs of clients.


Appraisal Client influence Institutional investors Performance measurement Real estate 



The authors acknowledge the contribution of Dr Yarim Shamsan, who compiled the data for this study while working as a joint research officer for the University of Reading and Investment Property Databank.


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Copyright information

© Springer Science+Business Media Dordrecht 2015

Authors and Affiliations

  • Neil Crosby
    • 1
  • Steven Devaney
    • 1
    Email author
  • Colin Lizieri
    • 2
  • Patrick McAllister
    • 1
  1. 1.Henley Business SchoolUniversity of ReadingReadingUK
  2. 2.Department of Land EconomyUniversity of CambridgeCambridgeUK

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