IDEAS home Printed from https://ideas.repec.org/a/jre/issued/v10n31995p263-278.html
   My bibliography  Save this article

An Empirical Examination of Compensation of REIT Managers

Author

Abstract

Principal-agent literature finds that manager and owner incentives can be aligned with performance contingent contracts. We investigate the compensation of Real Estate Investment Trust (REIT) industry executives. The competitive nature of mortgage and equity markets, in conjunction with the corporate tax exemption available when REITs distribute most of their earnings as dividends, is likely to influence the compensation of REIT managers. Executive compensation is modeled as a function of revenues and unexpected profit. After transforming the model to reduce collinearity and heteroskedasticity, we find compensation to be generally positively related to revenue. We also find unexpected profit to be generally insignificantly related to compensation, but positively related in those cases where it is significant.

Suggested Citation

  • Marc C. Chopin & Ross N. Dickens & Roger M. Shelor, 1995. "An Empirical Examination of Compensation of REIT Managers," Journal of Real Estate Research, American Real Estate Society, vol. 10(3), pages 263-278.
    • Handle: RePEc:jre:issued:v:10:n:3:1995:p:263-278
    as

    Download full text from publisher

    File URL: http://pages.jh.edu/jrer/papers/pdf/past/vol10n03/v10p263.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lewellen, Wilbur G & Huntsman, Blaine, 1970. "Managerial Pay and Corporate Performance," American Economic Review, American Economic Association, vol. 60(4), pages 710-720, September.
    2. Reitman, David, 1993. "Stock Options and the Strategic Use of Managerial Incentives," American Economic Review, American Economic Association, vol. 83(3), pages 513-524, June.
    3. Anup Agrawal & Anil K. Makhija & Gershon Mandelker, 1991. "Executive Compensation and Corporate Performance in Electric and Gas Utilities," Financial Management, Financial Management Association, vol. 20(4), Winter.
    4. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    5. Bengt Holmstrom, 1979. "Moral Hazard and Observability," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 74-91, Spring.
    6. Benston, George J., 1985. "The self-serving management hypothesis : Some evidence," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 67-84, April.
    7. Murphy, Kevin J., 1985. "Corporate performance and managerial remuneration : An empirical analysis," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 11-42, April.
    8. Robert Gibbons & Kevin J. Murphy, 1990. "Relative Performance Evaluation for Chief Executive Officers," ILR Review, Cornell University, ILR School, vol. 43(3), pages 30, April.
    9. Brian A. Marts & Fayez A. Elayan, 1990. "Capital Structure and the Cost of Capital for Untaxed Firms: The Case of REITs," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(1), pages 22-39, March.
    10. K. C. Chan & Patric H. Hendershott & Anthony B. Sanders, 1990. "Risk and Return on Real Estate: Evidence from Equity REITs," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(4), pages 431-452, December.
    11. Fershtman, Chaim & Judd, Kenneth L, 1987. "Equilibrium Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 77(5), pages 927-940, December.
    12. Coughlan, Anne T. & Schmidt, Ronald M., 1985. "Executive compensation, management turnover, and firm performance : An empirical investigation," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 43-66, April.
    13. Han Kim, E. & Lewellen, Wilbur G. & McConnell, John J., 1979. "Financial leverage clienteles : Theory and evidence," Journal of Financial Economics, Elsevier, vol. 7(1), pages 83-109, March.
    14. Steven D. Sklivas, 1987. "The Strategic Choice of Managerial Incentives," RAND Journal of Economics, The RAND Corporation, vol. 18(3), pages 452-458, Autumn.
    15. John S. Howe & James D. Shilling, 1990. "REIT Advisor Performance," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(4), pages 479-500, December.
    16. Ely, Km, 1991. "Interindustry Differences In The Relation Between Compensation And Firm Performance Variables," Journal of Accounting Research, Wiley Blackwell, vol. 29(1), pages 37-58.
    17. Wang, Ko & Chan, Su Han & Gau, George W., 1992. "Initial public offerings of equity securities *1: Anomalous evidence using REITs," Journal of Financial Economics, Elsevier, vol. 31(3), pages 381-410, June.
    18. Harris, Milton & Raviv, Artur, 1979. "Optimal incentive contracts with imperfect information," Journal of Economic Theory, Elsevier, vol. 20(2), pages 231-259, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chinmoy Ghosh & C. Sirmans, 2006. "Do Managerial Motives Impact Dividend Decisions in REITs?," The Journal of Real Estate Finance and Economics, Springer, vol. 32(3), pages 327-355, May.
    2. Scott, John L. & Anderson, Randy I. & Webb, James R., 2005. "The labor-leisure choice in executive compensation plans: Does too much pay reduce REIT performance?," Journal of Economics and Business, Elsevier, vol. 57(2), pages 151-163.
    3. Piet Eichholtz & Nils Kok & Roger Otten, 2008. "Executive Compensation in UK Property Companies," The Journal of Real Estate Finance and Economics, Springer, vol. 36(4), pages 405-426, May.
    4. William G. Hardin, III, 1998. "Executive Compensation in EREITs: EREIT Size is But One Determinant," Journal of Real Estate Research, American Real Estate Society, vol. 16(3), pages 401-410.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carola Frydman & Dirk Jenter, 2010. "CEO Compensation," Annual Review of Financial Economics, Annual Reviews, vol. 2(1), pages 75-102, December.
    2. Bushman, Robert M. & Smith, Abbie J., 2001. "Financial accounting information and corporate governance," Journal of Accounting and Economics, Elsevier, vol. 32(1-3), pages 237-333, December.
    3. Dirk Jenter & Fadi Kanaan, 2015. "CEO Turnover and Relative Performance Evaluation," Journal of Finance, American Finance Association, vol. 70(5), pages 2155-2184, October.
    4. repec:eee:labchp:v:3:y:1999:i:pb:p:2485-2563 is not listed on IDEAS
    5. Barkema, H.G., 1989. "An empirical test of Holmstroem's principal-agent model that takes tax and signally hypotheses explicitly into account," Research Memorandum FEW 405, Tilburg University, School of Economics and Management.
    6. Mehran, Hamid, 1995. "Executive compensation structure, ownership, and firm performance," Journal of Financial Economics, Elsevier, vol. 38(2), pages 163-184, June.
    7. John M. Abowd, 1989. "Does Performance-Based Managerial Compensation Affect Subsequent Corporate Performance?," NBER Working Papers 3149, National Bureau of Economic Research, Inc.
    8. Ahmed Ennasri, 2010. "Incitations Managériales et Concurrence : Synthèse de la Littérature," Studies and Syntheses 10-03, LAMETA, Universtiy of Montpellier, revised Oct 2010.
    9. Benoît Pigé, 1994. "La politique de rémunération en tant qu'incitation à la performance des dirigeants," Post-Print hal-02175846, HAL.
    10. Shleifer, Andrei & Vishny, Robert W, 1997. "A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    11. Brian J. Hall & Jeffrey B. Liebman, 1998. "Are CEOs Really Paid Like Bureaucrats?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(3), pages 653-691.
    12. Abe, Naohito & Gaston, Noel & Kubo, Katsuyuki, 2005. "Executive pay in Japan: the role of bank-appointed monitors and the Main Bank relationship," Japan and the World Economy, Elsevier, vol. 17(3), pages 371-394, August.
    13. Rajesh K. Aggarwal & Andrew A. Samwick, 1999. "Executive Compensation, Strategic Competition, and Relative Performance Evaluation: Theory and Evidence," Journal of Finance, American Finance Association, vol. 54(6), pages 1999-2043, December.
    14. Gregory E. Goering & T. Harikumar, 1999. "Investment decisions and managerial compensation design in the presence of product market rivalry," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(2), pages 87-97.
    15. Spagnolo, Giancarlo, 2005. "Managerial incentives and collusive behavior," European Economic Review, Elsevier, vol. 49(6), pages 1501-1523, August.
    16. Baber, William R. & Kang, Sok-Hyon & Kumar, Krishna R., 1998. "Accounting earnings and executive compensation:: The role of earnings persistence," Journal of Accounting and Economics, Elsevier, vol. 25(2), pages 169-193, May.
    17. Athar, Iqbal & Khan, Muhammad Irfan & Ali, Saffar, 2012. "CEO Compensation and Bank Performance," MPRA Paper 42402, University Library of Munich, Germany, revised 02 Sep 2012.
    18. Sangeun Ha & Fangyuan Ma & Alminas Žaldokas, 2021. "Motivating Collusion," HKUST CEP Working Papers Series 202108, HKUST Center for Economic Policy.
    19. Renneboog, L.D.R. & Trojanowski, G., 2002. "The Managerial Labor Market and the Governance Role of Shareholder Control Structures in the UK," Discussion Paper 2002-68, Tilburg University, Center for Economic Research.
    20. Miguel Antón & Florian Ederer & Mireia Giné & Martin Schmalz, 2023. "Common Ownership, Competition, and Top Management Incentives," Journal of Political Economy, University of Chicago Press, vol. 131(5), pages 1294-1355.
    21. Zhou, Xianming, 1999. "Executive compensation and managerial incentives: A comparison between Canada and the United States1," Journal of Corporate Finance, Elsevier, vol. 5(3), pages 277-301, September.

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jre:issued:v:10:n:3:1995:p:263-278. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: JRER Graduate Assistant/Webmaster (email available below). General contact details of provider: http://www.aresnet.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.