RT Journal Article SR Electronic T1 The Impact of Corporate Governance on the Performance of REITs JF The Journal of Portfolio Management FD Institutional Investor Journals SP 175 OP 191 DO 10.3905/jpm.2007.699613 VO 33 IS 5 A1 Candy Bianco A1 Chinmoy Ghosh A1 C.F. Sirmans YR 2007 UL https://pm-research.com/content/33/5/175.abstract AB 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