Corporate Governance and Performance in the Market for Corporate Control: The Case of REITs

We examine 111 mergers and acquisitions by public U.S. Real Estate Investment Trusts (REITs) 1997-2005. We find that acquirer abnormal shareholder returns are significantly positive for mergers with private targets and significantly negative for public targets, a result that is consistent with findings for conventional firms. We examine the relationship between acquirer corporate governance and abnormal returns. Shareholder returns are lower for REITs wih larger and staggered boards, longer CEO tenure, lower percentage ownership by their CEO and management and when block holders are present. This is consistent with recent evidence form the conventional financial theory. Returns are positively related to the firm's operating performance prior to the merger announcement and negatively related to the leverage of the acquirer.