AN ANALYSIS OF THE IMPACT OF SINGAPORE REIT �S COMPENSATION STRUCTURE ON IPO STOCK VALUATION AND POST-IPO PERFORMANCE

Abstract

This study seeks to investigate the effects of manager's compensation structure on initial public offering (IPO) as well as its post-IPO performance. The research focuses on 35 Singapore Real Estate Investment Trusts (S-REITs) that are currently listed on the Singapore Stock Exchange. The compensation structure of each REIT is split into four different components: base fee, performance fee, total fee, and a predetermined performance benchmark. The results as a whole suggest that a low base fee, together with a high performance fee pegged to a predetermined benchmark is highly favoured by the investment market during the IPO stage and will continue to bring superior performance to the REIT. Specifically, a high base fee results in significant underpricing of the REIT, proving that investors do not favour a high base fee. Despite a weak significance of the predetermined performance fee, a slight positive impact on post-IPO performance was observed in addition to the statistically significant positive relationship between a high performance fee and post-IPO performance.