IMPACT OF ADVISOR STRUCTURE ON REIT PERFORMANCE: A STUDY OF US REIT

Abstract

This dissertation seeks justification for the continued existence of externally advised REITs despite empirical evidence of the underperformance of externally advised REITs to internally advised REITs in the old REIT era. The source of this underperformance has been traced to agency problem associated with the external advisor structure. Focusing on the new REIT era, the impact of advisor structure on REIT performance is studied in this dissertation to re-investigate whether externally advised REITs still underperform internally advised REITs in the more recent context. It is found that externally advised REITs may no longer underperform internally advised REITs in this new REIT era, a result that differs from previous findings. The results show that there is a possible convergence in performance between the two advisor structures. The possible reasons for the observed convergence were then further examined in the later part of this dissertation. It is concluded that higher institutional ownership leads to greater monitoring of REIT advisors and hence, less opportunistic motivations amongst these external advisors, as supported by Striewe, Rottke and Zietz (2013).