The impact of gender and ethnic diversity on REIT operating performance

Purpose The purpose of this paper is to examine the relationship between gender and ethnic diversity in managerial positions and Real Estate Investment Trust (REIT) operating performance. Design/methodology/approach The authors employ two-stage Heckman correction models on an unbalanced panel of US Equity REITs for the time period from 2000 to 2015. The second-stage model uses multiple operating performance measures regressed on a dichotomous variable that indicates if the REIT promotes diversity in middle management in addition to a vector of control variables. Findings The results indicate that REITs that promote diversity in middle management with profit-and-loss responsibilities have lower operating performance than comparable counterparts. That is, gender and demographic diversity is negatively related to REIT performance as measured by return on assets, return on equity and funds from operations. Practical implications The analysis indicates that while gender and ethnic diversity is socially responsible and may provide many benefits, diversity among managers and decision makers has to be carefully implemented in order to achieve positive financial results. Originality/value This paper contributes to the literature by investigating whether diversity in leading managerial positions, other than in top officer ranks and on the board of directors, have an impact on REIT operating performance.