Abstract

The purpose of this thesis is to examine the effect of staggered boards on firm value for real estate investment trusts (REITs). We argue that REITs are highly regulated firms in an environment where the takeover market is inactive. We investigate whether takeover devices function well and whether corporate governance hypotheses hold for REITs. We hypothesize that the inefficient management hypothesis does not hold for REITs and that staggered boards have no negative impact on firm value. We collect data for all REITs listed on Compustat and merge them with information from CRSP, BoardEx and company fillings from the SEC’s EDGAR database over the period 1990 to 2016. We conduct an event study to test whether takeovers discipline inefficient managers in the real estate sector and estimate a logistic regression to examine whether staggered boards resist takeovers after controlling for prior firm performance, firm financials and board related variables. In addition, we estimate an ordinary least squares (OLS) regression to explore whether staggered boards enhance internal monitoring effectiveness and positively affect firm value. The results indicate that the market for corporate control in the real estate sector fails to discipline inefficient managers, however lower prior firm performance increases a firm’s probability of becoming a takeover target. The results also reveal that staggered boards have a negative effect on shareholders’ wealth regardless of takeover probability.