THE IMPACT OF CEO ATTRIBUTES ON THE PERFORMANCE OF REAL ESTATE INVESTMENT TRUSTS

Abstract

Strong management is often said to be one of the key success factors for a Real Estate Investment Trust (REIT). While there have been numerous studies of the relationship between characteristics of Chief Executive Officers (CEOs) and their respective firm’s performance, there has been little research in relation to the impact of top management on REIT markets. This study aims to analyse the impact of CEO’s 1) Age; 2) Gender; 3) Years of Real Estate Experience, and lastly 4) Education, on their REIT risk profile and performance. The tests for the impact of REITs CEO are conducted in two ways. First, an event study is performed to look into whether CEO turnover have an impact on stock performance. Second, panel regressions are used to examine the key characteristics of a CEO that affect a REIT’s performance and its risk profile. Four main findings are derived. First, the age of a REIT CEO is positively correlated with improvements in REITs’ earnings, Returns on Common Equity (ROCE) and Returns on Investment (ROI); and negatively correlated with a REIT’s Debt-to-Capital ratio. Second, female CEOs significantly take on less debt, spend less on capital expenditure, have a lower dividend pay-out ratio, but still manage to achieve higher Return on Assets (ROA) than their male counterparts. Third, CEOs with real estate training do significantly better in terms of maximising profits for REITs. Fourth, CEOs with a MBA degree spend significantly less on capital expenditure, but are still able to improve ROCE and ROA. Five, the number of years of real experience can only significantly improves firm performance if the CEO has a MBA degree. Overall, the findings clearly show that the age, gender, real estate training and a MBA qualification are the characteristics of CEOs that significantly affect Singapore REITs’ (S-REIT) prospects.