In hotel REITs, are institutional investors beneficial for firm value?

Abstract

Motivated by growing attention to the agency problems of institutional investors, along with recent changes that have identified real estate investment trusts (REITs) as a separate industry segment, this study investigates the impacts of institutional ownership on the firm value of hotel REITs. Hotel REITs provide unique regulatory and operational settings in which it is appropriate to investigate the potential adverse consequences of institutional investments on firm value. This study performs additional analyses using non-REIT hotel corporations (hotel C-corporations) for comparison. After testing pooled ordinary least squares, fixed and random effects, and two-stage least squares in quadratic models, the results of the random effects models are found to be valid and are thus adopted to examine the hypothesized relationship. The analysis showed a U-shaped relationship between institutional ownership and firm value (as measured using Tobin’s q) but a dominantly negative relationship in the majority of observations, whereas no significant relationship is found for hotel C-corporations.

Corporate Social Responsibility Disclosure (CSRD) and Financial Distressed Risk (FDR): Does Institutional Ownership Matter?

“…The study found concrete evidence that firms with higher institutional owners do enjoy a lower risk of financial distress, suggesting that better regulatory actions on the performance of managers are rewarded with fewer financial defaults. Our findings are in line with the studies of Abdullah [93], Bjuggren et al [95], Hanifah and Purwanto [96], Cinantya and Merkusiwati [97], Fathonah [98], Mukaria et al [49], Mira [50], Daryaei and Fattahi [51], and Ling et al [52]; however, our results are not similar to the results of Shin-Ping and Tsung-Hsien [114], Fazlzadeh [115], and Paek et al [116]. According to the agency theory, since institutional owners effectively monitor the company's actions to prevent opportunistic managers from harming shareholders' interests, they can reduce agency conflicts and improve corporate performance [43][44][45].…”

“…Given that the relationship between institutional ownership and corporate financial performance is positive in some studies [52,112,113], negative in others [114][115][116], and even meaningless in some [117,118], it can be concluded that the type of relationship depends more on market economic conditions and the views of institutional investors. In Iran's market, institutional investors have a significant share in the ownership structure of Iranian companies.…”

Institutional investor heterogeneity and analyst recommendation: Malaysian evidence

“…Recent statistics by the Organisation for Economic Cooperation and Development (OECD) show that institutional investors hold around 41% of global market capitalisation (De La Cruz et al, 2019). As such, they play a significant role through constructive engagement and shareholder activism to improve the corporate governance of their investees or portfolio firms (Paek et al, 2020;Tan, 2019). Previous studies show that ownership by institutional investors has led to an improvement in the quality of reported earnings and corporate disclosure (Bird & Karolyi, 2016;Velury & Jenkins, 2006), stock returns (Jiambalvo et al, 2002), firm performance (Muniandy et al, 2016;Yang & Shyu, 2019), real social impact (Chen et al, 2020), and return volatility (Lin et al, 2018).…”

Sustainable Development of Corporate Governance in the Hospitality and Tourism Industry: The Evolution and the Future

“…Tourism enterprises can gain a good reputation by assuming social responsibility. On the one hand, tourism companies' social responsibility conveys a stable and optimistic expectation of future earnings to investors, which leads to higher market evaluation; on the other hand, they can convey a positive image of the company to customers and gain a competitive advantage [46]. Compared to other companies, tourism companies are more sensitive to local culture and environmental changes, so they should carry out CSR activities depending on the national culture of the location and the characteristics of different stakeholders [47].…”