PERFORMANCE FEES AND CEO'S ATTRIBUTES OF S-REIT MANAGERS

Abstract

This dissertation empirically analyses the correlation between the REIT Manager’s performance fee and the CEO’s attributes. To begin the study, the historical data of all S-REIT Manager’s CEO were obtained. This data were classified and sorted into various attributes of the CEO. Financial data such as the REIT Manager’s performance fees, management fees, REIT’s abnormal return, ROE, Tobin's Q ratio and beta etc were collected from the annual reports and DataStream. The time frame of this research would be from 2003 to 2016. It is a relatively short time window due to the relatively new S-REIT market.

This research has adopted a 2-stage least squares (2SLS) regression analysis to address possible endogeneity between the dependent variables and the independent variables. The variable “ceolocal”, which is a dummy variable that identifies a local CEO as 1; and otherwise 0 for a foreign CEO, was used as the instrumental variable in the model.

The first stage regression showed that foreign CEOs tend to spend more on capital expenditure, when weighed against the REIT’s total assets. Local CEOs managed significantly larger REITs and are also better in growing the REIT’s total assets base. The second stage regression shows that the performance fee, when taken as a percentage of the management fees received by REIT Managers (Perftomgm), have been empirically proven to be affected by the age and gender of the CEOs. Age is positively correlated with the performance fee, and thus the older the CEO the higher the expected performance fees earned. Female CEOs tend to be paid more and CEOS of a Business Trust are expected to be paid more than one of a REIT.

In summary, it has been found that that the performance fee can be affected by certain attributes of the REIT Manager’s CEO. REIT Managers and unit holders should look for CEOs with these positive attributes when prospecting a new CEO.