INSTITUTIONAL OWNERSHIP IN SINGAPORE REITS : INSTITUTIONAL DOMINANCE, INVESTMENT STRATEGY AND VALUE OF REIT

Abstract

This paper examines institutional ownership in the context of Singapore Real Estate Investment Trusts (REITs). Focusing on three research objectives, this study 1) observes the distribution of institutional ownership across S-REITs from 2007 to 2011; 2) studies the pool of institutional investors, paying special attention to the largest institutional investors and their investment habits and; 3) empirically examines through an OLS regression, the relationship between institutional investor size on firm value, (represented through Tobin’s Q and return on capital), performance (represented by alpha) and volatility (represented by beta). The level of institutional ownership altered over the period of the crisis, decreasing in most REITs but increasing in some. It was also observed that institutional investor market proportions are highly skewed with only few investors dominating the market. These larger investors tend to diversify their S-REIT portfolios by number of REITs and by REIT sector. Results from the ordinary least squares regression indicate that institutional investor dominance has a positive impact on the value and performance of the REIT. This implies that larger investors through their larger aggregate ownership are more incentivised to monitor REIT managers to enhance performance and the value of the REIT. Smaller institutional investors that are known to bear less informational advantages, and trade mainly on the basis of noise and fads, increase the volatility of the REIT.