CORPORATE FOCUS AND STOCK PERFORMANCE OF REAL ESTATE COMPANIES IN ASIA

Abstract

This study seeks to investigate the stock performance of eighty real estate companies from five Asian markets - Singapore, Thailand, Hong Kong, Malaysia and Japan - based on the corporate strategies employed during three sub-periods: Before, During and After the Global Financial Crisis (GFC). Using the revenue-based specialization ratio, the companies are first sorted into three groups: Property Investment Companies, Property Development Companies and Diversified Property Companies. Thereafter, stock market performance analysis is conducted on the companies within each group over the different sub-periods. Finally, both one-way and two-way ANOVA tests are carried out to determine if there is a statistically significant difference between the group means. We find that corporate focus has no significant effect on the stock performance before and during the GFC. It was only after the GFC that corporate focus significantly influenced stock performance. The results suggest that property stocks were not properly priced according to their expected risk level before and during the GFC. Since then, the market appears to price property stocks according to the expected riskiness of the different corporate strategies employed with development activities having the highest ex ante risk. The implication of this research is that investors should now place enough emphasis on corporate focus compared to previous periods in order to achieve their expected returns. The management of listed companies, similarly, need to devise appropriate corporate strategies to lower their companies’ expected risk levels so as to improve their stock performance.