Women directors’ effect on firm value and performance: the case of REITs

• Published date: 15 September 2020
• Date: 15 September 2020
• Pages: 1265-1279
• DOI: https://doi.org/10.1108/CG-02-2020-0057
• Author: Magdy Noguera
• Subject Matter: Strategy,Corporate governance

Women directors’effect on firm value and

performance: the case of REITs

Magdy Noguera

Abstract

Purpose –The purpose of this paper is to assess the effect of women directors on US Real Estate

InvestmentTrusts (REITs) value and performance.

Design/methodology/approach –Archival financial and board of director data for the 1999–2019

period arecollected and analyzed using panel dataregression analysis.

Findings –The main findings indicatethat women directors’ presence renders a modestpositive effect

on REIT performance but only whenthey reach critical mass on REIT boards; and that women directors

have no effect at all on REIT value. Additional findings indicate that womendirectors are more common

on REIT boards after the enactmentof the Sarbanes–Oxley Act but less common on boardsin which the

REIT founderis the chief executive officer.

Originality/value –To the best of the author’s knowledge, this is the first research on the effect of a

gender diverseboard on REIT value. It is also the firstpaper documenting a positive relationshipbetween

board gender diversity and REIT performance. This paper fills a research gap, as it is one of the few

papersfocused on gender diversity within the REITs board compositionliterature.

Keywords Corporate governance, Board gender diversity, Critical mass, Women directors,

REIT performance, REIT value

Paper type Research paper

1. Introduction

Non-Real Estate Investment Trusts (REITs) research on board composition has recently

turned its attention to the role of women as directors and their contributions to their firms’

value and performance. Overall, findings have been mixed but ample work has indicated

that engaging women on companies’ boards of directors bring benefits to their firms

(Adams and Ferreira, 2009;Campbell and Minguez-Vera, 2008;Carter et al.,2003;Erhardt

et al.,2003

;Isidro and Sobral, 2015). Despite the evidence,the US REIT board composition

research has largely ignored board gender diversity. To fill this gap, this paper investigates

the effects of women directors on REITvalue and performance.

Studying REIT board gender diversity is important for two reasons. First, REITs governance

practices require their own research because they differ from those of regular corporations

and other financial institutions. Specifically, REITs tend to have a high presence of core,

founding shareholders; high takeover defenses, a high percentage of split chairman/chief

executive officer (CEO) positions (but with the founder typically becoming the chairman

once he has retired as CEO) and low board independence, with many of these independent

directors having significant real estate experience. In contrast, financial institutions (banks

and insurance firms) and nonfinancial corporations have less of a presence of core

shareholders, lower takeover defenses, an increasing but still not as common CEO/

chairman role separation and relatively high board independence and directors with

relatively low sector experience (Moody’s,2005). This evidence suggests that REITs boards

are male, founder dominated boards that could benefit from adding more independent

Magdy Noguera is based at

the College of Business

and Economics, University

of Idaho, Moscow, Idaho,

USA.

Received 22 January 2020

Revised 4 June 2020

18 June 2020

Accepted 13 August 2020

DOI 10.1108/CG-02-2020-0057 VOL. 20 NO. 7 2020, pp. 1265-1279, ©Emerald Publishing Limited, ISSN 1472-0701 jCORPORATE GOVERNANCE jPAGE 1265