The Role of Corporate Governance in Initial Public Offerings: Evidence From Real Estate Investment Trusts

The Journal of Law and Economics (Impact Factor: 0.89). 08/2008; 51(3):539-562. DOI: 10.2139/ssrn.342700
Source: RePEc


This study analyzes the impact of corporate governance structures at the initial public offering (IPO) date. We test hypotheses that firms with more shareholder-oriented governance structures receive higher valuations at the IPO stage and have better long-term performance. Our sample is a set of 107 IPOs of real estate investment trusts (REITs) between 1991 and 1998. Using a single industry and REITs in particular reduces potentially confounding effects due to differences in risk, transparency, and growth potential. We believe this-combined with our use of IPOs-mitigates the endogeneity problem present in studies of the impact of governance on seasoned firms' valuation. Our analysis indicates that firms with stronger governance structures have higher IPO valuations and better long-term operating performance than their peers. (c) 2008 by The University of Chicago. All rights reserved..

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    • "A limitation of the difference-in-differences estimation (e.g., Edmans et al. (2013)) is that it does not eliminate the possibility of unobserved heterogeneity affecting the treated and control groups differently. The single-industry setting of REITs can reduce the confounding effects (Hartzell et al., 2008), providing a better control for unobserved heterogeneity when conducting matching and difference-in-differences tests. "

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    • "Results have been mixed. Hartzell et al (2008) find that firms with stronger governance structures have higher initial IPO valuations and have better long-term operating performance than their peers. In contrast, Bauer et al (2010) find that their index of governance strength is related neither to REITs' Tobin's Q nor to Return on Assets, "
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    ABSTRACT: This paper investigates whether energy performance ratings, as measured by mandatory Energy Performance Certificates (EPCs), are reflected in the sale prices of residential properties. This is the first large-scale empirical study of this topic in the UK involving approximately 400,000 dwellings in the period from 1995 to 2011. Applying hedonic regression and an augmented repeat sales regression, we find a positive relationship between the energy efficiency rating of a dwelling and the transaction price per square metre. The price effects of superior energy performance tend to be higher for terraced dwellings and flats compared to detached and semi-detached dwellings. The evidence is less clear-cut for house price growth rates but remains supportive of an overall positive association. Overall, the results of this study appear to support the hypothesis that energy efficiency levels are reflected in UK house prices, at least in recent years.
    SSRN Electronic Journal 02/2013; DOI:10.2139/ssrn.2225270
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    • "IPOs have some well-known drawbacks related to legal and managerial issues (Pastor et al., 2009; Chemmanur et al., 2010). Hartzell et al. (2008) fi nd that fi rms with stronger governance structures have higher initial IPO valuations and better long-term operating performance than their peers. Nelson (2003) studies the investor reaction to founder-led fi rms at IPO and found that the stock market reaction is higher to founder-led fi rms. "
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    ABSTRACT: Compartamos is an exemplary case of private equity-backed governance in microfinance.
    Strategic Change 11/2012; 21(7-8-7-8):331-341. DOI:10.1002/jsc.1912
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