REIT Governance, Entrepreneurial Control, and Corporate Value

Real estate investment trusts (REITs) exhibit a wide variety of ownership structures but most are entrepreneurially controlled by founders or families. We investigate the relation between REIT ownership/control and REIT valuation. Using proxy data from 1994 through 2007, our analysis shows that, consistent with the incentive alignment prediction of agency theory, founder/family REITs, on average, have a higher valuation than non-founder/non-family REITs. This result is driven by first-generation family and lone-founder REITs. Our results are also consistent with the entrenchment prediction of agency theory: limits on private benefits of control could lead to higher REIT valuation when founders/families do not occupy both board chairman and CEO positions.