Does governance matter for companies involved in real estate investment activities?

Abstract

This thesis seeks to explore the corporate governance issues for listed companies with intensive property holdings in Singapore market. Asset specificity, fixity in location, and difficulty in determining fair market values are some of the unique characteristics of real estate investment, which makes real estate investment more susceptible to the problem of quasi-rents. Governance issues are, therefore, assumed critical in real estate investment activities.Two key problems will be analyzed in this thesis. First, the study employs the two-stage least squares (2SLS) approach to examine the endogenous determinants of several corporate governance mechanisms, by considering the characteristics of both real estate investment and institutional environment in Singapore. Further, the Logit Model is employed to estimate the determinants of the board independence. Finally, the study runs and compares an ordinary least squares (OLS) regression and a 2SLS regression of firm performance on various corporate governance mechanisms to test the significance of the relationship between the firm performance and the ownership structure and the board independence.