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Keywords: Asian REITs, Sponsors, Corporate governance, Ownership structure, Agency problems
Issue Date: 1-Mar-2013
Citation: TANG CHENG KEAT (2013-03-01). SPONSOR OWNERSHIP IN ASIAN REITS. ScholarBank@NUS Repository.
Abstract: Sponsors are known as entities that originate the REIT by contributing an initial portfolio of properties into the REIT. Unique ¿captive¿ management structures and concentrated equity holdings by sponsors in Asia mean that sponsors are highly influential over the management of their REIT. Recent reports by RiskMetrics (2009) and CFA (2011) have highlighted concerns over dominant sponsors extracting private benefits from their REITs via inequitable related transactions. The main objectives of this study are to (1) identify the determinants of sponsor holdings and (2) examine whether larger sponsor holdings can serve to align the interest of sponsors and shareholders (Jensen and Meckling, 1976). Empirically, I report that developer and government linked sponsors retain largest shareholdings. I further document a positive significant relation between sponsor holdings and firm value (Tobin¿s Q) that is strictly linear across different empirical models. More committed sponsors are deterred from consuming perquisites as their wealth is increasingly tied to the REIT. Stronger monitoring from more committed institutional investors and powerful boards further enhance firm value. Additional test reveals that the nature of sponsors matter. Specifically, REITs backed by developers and banks are more highly valued and incentive alignment effects are much greater surrounding developer sponsors. A comparison of various financial ratios stratified according to sponsor type and ownership levels further reveals that bank and developer sponsors confer financing and operational benefits respectively to their REITs, leading to higher firm valuation.
Appears in Collections:Master's Theses (Open)

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