Institutional investors as monitors of corporate diversification decisions: Evidence from real estate investment trusts

Jay C Hartzell, Libo Sun, Sheridan Titman

    Research output: Contribution to journalArticle

    17 Citations (Scopus)

    Abstract

    Determining whether diversification adds or destroys value is notoriously difficult, leaving open the question of the degree to which any diversification discount can be affected by management quality and oversight. This study uses the unique setting of real estate investment trusts (REITs), which can diversify over property types as well as locations, to examine this issue. We find that REITs that diversify by investing in more locations tend to be valued lower than REITs with a tighter geographical focus. More importantly, our results suggest that the diversification discount is lower for firms with more institutional ownership, especially institutional types that tend to be more active monitors.

    Original languageEnglish (US)
    Pages (from-to)61-72
    Number of pages12
    JournalJournal of Corporate Finance
    Volume25
    DOIs
    StatePublished - Apr 1 2014

    Fingerprint

    Corporate diversification
    Institutional investors
    Real estate investment trusts
    Diversification discount
    Institutional ownership
    Investing
    Oversight
    Quality management
    Diversification

    Keywords

    • Corporate governance
    • Diversification
    • Institutional investors
    • REITs

    ASJC Scopus subject areas

    • Business and International Management
    • Finance
    • Economics and Econometrics
    • Strategy and Management

    Cite this

    Institutional investors as monitors of corporate diversification decisions : Evidence from real estate investment trusts. / Hartzell, Jay C; Sun, Libo; Titman, Sheridan.

    In: Journal of Corporate Finance, Vol. 25, 01.04.2014, p. 61-72.

    Research output: Contribution to journalArticle

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