TY - JOUR T1 - The Impact of Corporate Governance on the Performance of REITs JF - The Journal of Portfolio Management SP - 175 LP - 191 DO - 10.3905/jpm.2007.699613 VL - 33 IS - 5 AU - Candy Bianco AU - Chinmoy Ghosh AU - C.F. Sirmans Y1 - 2007/09/30 UR - https://pm-research.com/content/33/5/175.abstract N2 - The authors examine the relationship between the “external” governance index (G-Index) developed in a 2003 study Gompers et al. and performance of REITs in 2004 and 2006. The G-Index is a sum of takeover barriers instituted by individual REITs, and antitakeover provisions in the state of a firm's incorporation. For the sample of REITs studies, the G-Index ranges from 3 to 13, with an average of 8. When compared to firms in general, shareholder rights in REITs are stronger than unregulated firms. The analysis shows, as expected, a significantly negative impact of G-Index on REIT performance for 2004. However, the effect is diminished in 2006. The authors contend that this is due to the G-Index of REITs increasing between 2004 and 2006, creating clustering around the mean value in 2006. This would render the G-Index less important when comparing performance across firms. In view of the fact that hostile takeovers are rare among REITs, the low G-Index and the irrelevance of G-Index in more recent times suggests that external governance is ineffective for REITs. Thus, more attention should be paid to the efficacy to internal governance mechanisms.TOPICS: Real estate, portfolio construction ER -