Italian Public Reits' Governance and Regulatory Structure : Effects on NAV Discount

This paper investigates the effects of the Italian REITs governance and intermediation structure on market prices discount over NAV figures. The hypothesis is that the mandatory provision of a shareholders' meeting in the article of association of newly established REITs offers potential protection to investors from managers' opportunistic behaviours when market discipline comes into play by inducing takeovers of poorly managed REITs. NAV discount may be influenced by other legal and economic REITs' features like leverage, mandatory listing and finite life of the closed-end investment vehicle. The results show that NAV discount increases as long as time to maturity and size of the fund increase. Conversely, NAV discount is negatively affected by liquidity (turnover) and leverage. The regulatory provision of a shareholders' meeting appears to have improved the investors' governance capability having a positive impact on NAV discount, by reducing it