Asset Location,Timing Ability and the Cross‐Section of Commercial Real Estate Returns

This study examines the sensitivity of equity REIT returns to time‐varying MSA allocations of REIT property portfolios. Using a large sample of individual commercial property holdings, we find significant cross‐sectional and time variation in REIT geographic exposures and the ability of these exposures to explain the cross‐section of REIT returns. We further find evidence consistent with REIT managers being able, on average, to time allocation decisions ahead of MSA outperformance. This effect is most prevalent in non‐gateway markets, varies significantly across MSAs and over time, and is concentrated in financially flexible firms with a more diversified geographic portfolio.     

Systematic Risk and Diversification in the Equity REIT Market

This paper employs stock market-based data to examine the systematic risk and diversification properties of publicly traded equity real estate investment trusts (REITs). A unique data sample is created by combining firm return data with information on their property type holdings and the location of their investments. The systematic risk of equity REITs appears to vary by the type of property in which they invest, with beta being significantly higher for retail-oriented REITs than for REITs owning industrial and warehouse properties. In addition, the stock market data provides no evidence that REIT diversification across property types or broad geographic regions actually results in meaningful diversification as reflected in a standard market-based measure—the R ² from a simple market model regression.     

The Dynamics of REIT Pricing Efficiency

We study the dynamics of pricing efficiency in the equity REIT market from 1993 to 2014. We measure pricing efficiency at the firm level using variance ratios calculated from quote midpoints in the TAQ database. We find four main results. First, on average, the market is efficient, with variance ratios close to one. However, in any given year, there is considerable cross‐sectional variation in variance ratios, suggesting at least some firms are priced inefficiently. Second, higher institutional ownership by active institutional investors is related to better pricing efficiency, while passive ownership does not reduce pricing efficiency. Third, REITs that are included in the S&P 500 and S&P 400 are priced more efficiently than other REITs. For the S&P 500 firms, we find evidence that this was purely driven by sample selection, while for S&P 400 firms, we find evidence that it is inclusion in the index that drives efficiency. Finally, we find evidence that firm investment, analyst coverage and debt capital raising activity can influence pricing efficiency.     

Institutional Investors' Preferences for REIT Stocks

This article investigates the determinants of real estate investment trusts (REIT) portfolio investment and institutional REIT ownership using multivariate Tobit regressions. We contend that many institutional investors take larger positions in more liquid assets like REIT stocks, as compared with private real estate equities, because of liquidity considerations. Consistent with this contention, we find that liquidity constraints are significantly related to REIT portfolio investment by institutional investors. We also find that institutional investors have different preferences for REIT stocks than do other investors; they generally prefer larger, more liquid REIT stocks.     

How do institutional investors react to local shocks during a crisis? A test using the COVID-19 pandemic

We examine how institutional investors reacted to geographically dispersed local shocks during the early stages of the COVID-19 pandemic. A sample of real estate investment trusts (REITs) enables us to link two layers of geography: the locations of the assets in which the REITs were invested and the headquarters locations of institutional investors who owned REIT shares. We find that the institutional ownership of firms with an economic interest in the investors’ home markets declined more if those markets were heavily affected by the pandemic. In addition, the ownership responses to the COVID-19 shock were larger in those markets in which REITs had larger portfolio allocations and in markets that were home to the investors. Importantly, we find that nonpassive and short-term investors may have overreacted to the local shocks because their REIT portfolios subsequently underperformed relative to passive and long-term investors. Our study highlights the importance of geography in the formation of investors’ expectations during market crises.     

Institutional common ownership and firm value: Evidence from real estate investment trusts

This paper contributes to the ongoing debate about whether and how institutional common ownership (ICO) affects firm behavior. Using a sample of equity real estate investment trusts (REITs), which provide significant advantages for isolating a monitoring channel, we find a robust and positive relation between ICO and REIT firm value. The positive relation between ICO and firm value is driven mainly by motivated investors and becomes stronger when we construct our ICO measures using blockholdings. Our difference‐in‐differences analysis, using mergers between institutional investors, suggests a causal relation exists between ICO and firm value. After investigating various channels through which ICO could affect firm behavior, we conclude that asset allocation decisions and performance are the most plausible explanations. Our finding that the monitoring associated with ICO aids managers in their portfolio disposition strategies further supports this conclusion. This enhanced monitoring leads to increased property portfolio returns, as well as more geographic diversification.     

Historic Returns and Institutional Real Estate Portfolios

This study employs a sample of equity REIT portfolios from 1972–78 to investigate various aspects of real estate returns. Return estimates are derived for the unlevered cash yields by property size, type and location. Based on these data, the effects of certain kinds of diversification on risk-adjusted returns are examined. Finally, historic REIT portfolios are compared to current commingled fund portfolios and suggestions made concerning the benefits of restructuring.     

Technological Diversification, Coherence, and Performance of Firms

Technological diversification at the firm level (i.e., the expansion of a firm's technology base into a wide range of technology fields) is found to be a prevailing phenomenon in all three major industrialized regions,—the United States, Europe, and Japan—prompting the term multitechnology corporation. Whereas previous studies have provided insights into the composition of technology portfolios of multitechnology firms, little is known about the relationship between technological diversification and firms' technological performance. Against a backdrop of the technology and innovation management literature, the present article investigates the relationship between technological diversification and technological performance, taking into account the moderating role of technological coherence in firms' technology portfolios. Hereby, technological coherence is defined as the degree to which technologies in a technology portfolio are technologically related. To measure the technological coherence of portfolios, a measure of technological relatedness of technology fields is constructed based on patent citation patterns found in 450,000 European Patent Office (EPO) patent grants. Two hypotheses are presented here: (1) Technological diversification has an inverted U‐shaped relationship with technological performance; and (2) technological coherence moderates the relationship between technological diversification and technological performance positively. These hypotheses are tested empirically using a panel data set (1995–2003) on patent portfolios pertaining to 184 U.S., European, and Japanese firms. The firms selected are the largest research and development (R&D) actors in five industries: pharmaceuticals and biotechnology; chemicals; engineering and general machinery; information technology (IT) hardware (i.e., computers and communication equipment); and electronics and electrical machinery. Empirical results, obtained by fixed‐effects negative binomial regressions, support both hypotheses in the present article. Technological diversification has an inverted U‐shaped relationship with technological performance. Technological diversification offers opportunities for cross‐fertilization and technology fusion, but high levels of diversification may yield few marginal benefits as firms risk lacking sufficient levels of scale to benefit from wide‐ranging technological diversification, and firms may encounter high levels of coordination and integration costs. Further, the results show that the net benefits of technological diversification are higher in technologically coherent technology portfolios. If firms build up a technologically coherent diversified portfolio, the presence of sufficient levels of scale is ensured and coordination costs are limited. At the same time, technologically coherent diversification puts firms in a better position to benefit form cross‐fertilization between technologies. The present article clearly identifies the important role of technological coherence in technology diversification strategies of firms.     

Valuing Stakeholder Governance: Property Rights,Community Mobilization,and Firm Value

Research summary : While research has shown that good stakeholder relations increase the value of a firm, less is known about how specific types of stakeholder governance affect firm value. We examine the value of one such governance mechanism—community benefits agreements (CBAs) signed by firms and local communities—intended to minimize social conflict that disrupts access to valuable resources. We argue that shareholders evaluate more positively CBAs with local communities with strong property rights and histories of institutional action and extra‐institutional mobilization because these communities are more likely to cause costly disruptions and delays for a firm. We evaluate these arguments by analyzing the cumulative abnormal returns associated with the unexpected announcement of 148 CBAs signed between mining companies and local indigenous communities in Canada. Managerial summary : With firms across many industries facing escalating costs associated with social conflict, new tools are emerging to help firms mitigate these risks by seeking the support of the local communities in which they operate. Community benefits agreements (CBAs) are contracts in which a community provides consent for a new investment in return for tangible benefits, such as local hiring and revenue sharing. We argue that although CBAs are costly for the firm, they are particularly valuable when communities can cause costly disruptions and delays for a firm. Our study of investor reactions to the announcement of 148 CBAs signed between mining companies and local indigenous communities in Canada shows that investors value more CBAs signed with communities with strong property rights and histories of protest. Copyright © 2017 John Wiley & Sons, Ltd.     

Diversification and diffusion: A social networks and institutional perspective

We examine the diffusion of a major firm strategy, unrelated diversification, among a population of Chinese listed firms during the 1991 to 2002 period. We propose that a firm??s social network can serve as both an information disseminator and a channel of influence in the diffusion of the diversification decision. Further, we investigate how the institutional environment alters the role of a network over time. We find that firms are more likely to diversify into conglomerates if (1) they occupy a central position in the network; (2) they have higher levels of government shareholding; and (3) the firms with which they have network ties diversify. Moreover, as the institutional environment strengthens over time, the influence of a firm??s network partners decreases. Consistent with these results, we contend that diversification is not only a response to economic and agency concerns, but also a function of the social and institutional context in which a firm is embedded.     

Diversification Benefits of REIT Preferred and Common Stock: New Evidence from a Utility‐based Framework

We study the diversification benefits of REIT preferred and common stock using a utility‐based framework in which investors segment based on risk aversion. We examine optimal mean‐variance portfolios of investors with different levels of risk aversion given access to different classes of assets and establish three main results. First, REIT common stock helps low risk aversion investors attain portfolios with higher returns, while REIT preferred stock helps high risk aversion investors by providing a venue for risk reduction. Second, REIT preferred stock has a risk‐return profile not easily replicated by other asset classes. Finally, conclusions drawn from the empirical analysis are markedly different under these constraints compared to the classical unconstrained setting.     

Nonfinancial Considerations in Eco-Innovation Decisions: The Role of Family Ownership and Reputation Concerns

Societal pressures for greater sustainability can encourage firms to target part of their innovation activities at ecological initiatives (i.e., eco-innovation). Yet, depending on their value function, firms can respond differently to such pressures and exhibit variance in their eco-innovation activities. In this paper, we investigate the idea that a firm’s ownership structure may play a significant role in determining its engagement in eco-innovation. Specifically, we propose that ownership by family blockholders increases the value attached to the company’s reputation and that this, in turn, stimulates higher levels of eco-innovation. In other words, we model the company reputation motive as a key mediator in the relationship between family ownership and firm-level eco-innovation. To account for family firm heterogeneity, we also model the moderating role of owners’ intention to pass the business on to the next family generation (transgenerational intentions) and of the extent to which these owners reside in the firm’s local community (local embeddedness). As theoretical backdrop, our study builds on institutional theory and the mixed gamble logic. To test our hypotheses, we use a large sample of German firms and nonlinear moderated mediation regression analysis. Results reveal that family ownership is positively related to the introduction of eco-innovations by firms, in part because of the stronger emphasis being placed on the company’s reputation. We find that this effect is strongest when the owning-family has transgenerational intentions. As such, this study advances our understanding of firm-level drivers of eco-innovation. In view of the prevalence of family-owned firms and the mounting importance of ecological sustainability, it is valuable to extend knowledge on the contingent and indirect effect of family ownership on eco-innovation.     

Diversification and performance: evidence from East Asian firms

We examine the impact of diversification on performance for firms operating in different institutional environments during a relatively stable period and during a major economy‐wide shock. We locate our study in six Asian countries at different levels of institutional development. Results indicate that diversification negatively impacts performance in more developed institutional environments while improving performance only in the least developed environments. Even in the least developed institutional environments, diversification offers limited benefits when an economy‐wide shock strikes. Though successful diversifiers are sometimes affiliated with business groups, diversification is associated with poorer performance for both affiliated firms and independent firms. In sum, we find that the outcomes of diversification are influenced by institutional environments, economic stability and affiliation with business groups. Copyright © 2007 John Wiley & Sons, Ltd.     

Married to the firm? A large‐scale investigation of the social context of ownership

Research summary : Using a large sample of private firms across Europe, we examine how the social context of owners affects firm strategy and performance. Drawing on embeddedness theory and the institutional logics perspective, we argue that embeddedness in a family, in particular the nuclear family, can strengthen identification and commitment to the firm, but can also induce owners to behave more conservatively. Consistent with this argument, we find that family‐owned firms have higher profit margins, returns on assets, and survival rates compared to single‐owner or unrelated‐owners' firms, but also invest and grow more slowly, hold greater reserves of cash, and rely less on external debt. These differences are most pronounced when the two largest shareholders are married. Our results highlight the key role of marital ties in explaining differences in behavior and performance among firms. Managerial summary : Despite the prevalence of the married‐couple ownership structure in firms, little research has been dedicated to understanding how these firms are managed and perform. We examine the behavior and performance of firms owned by married couples in a large panel of closely held Western European firms. We find that married‐owner family firms are managed more conservatively relative to firms with unrelated owners and even to other family‐owned firms. In particular, married‐owner family firms invest and grow more slowly and rely less on external finance. However, they also exhibit greater performance stability and higher profitability. Our findings suggest that social relationships among owners have a large impact on firm strategy and performance, and highlight some potential trade‐offs to performance when married couples control firms. Copyright © 2015 John Wiley & Sons, Ltd.     

谁从谁获益:中国制造业中的外商直接投资

本文利用中国制造业1995年和2003年的行业数据，实证研究了不同国别外资企业与不同所有制内资企业组合产生的溢出效应模式。结果发现．外资存在与内资企业绩效间的关系并不是普遍而一致的．而是与外资企业的国别和内资企业的所有制类型密切相关。我们研究的主要结果表明，西方国家的投资较港、澳、台和海外华人投资对内资企业的影响相对更大。进一步发现西方企业对国有企业具有正向的溢出效应。而港、澳、台和海外华人企业则改进了内资非国有企业而不是国有企业的绩效。本文所发现的外资在中国制造业中溢出效应的有趣模式建议外资政策设计应着力促进不同类型外资与内资企业之间的特定组合，特别是西方跨国公司与本土国有企业及港、澳、台和海外华人企业与本土非国有企业之间的合作和良性互动．从而最大化外资溢出带来的溢出好处。     

Effects of intra- and inter-regional geographic diversification and product diversification on export performance: Evidence from the Chilean fresh fruit export sector

This study examines individually the effects of intra- and inter-regional geographic diversification on the export performance of firms from the Chilean fresh fruit sector. It also explores the direct effect of related product diversification on export performance and its role as a moderator in the relationship between geographic diversification and export performance. By employing panel trade data of 279 purely exporting firms over a six-years period (2010–2015), we found that both intra- and inter-regional diversification have an inverted U-shaped relationship with export performance, where moderate levels of diversification have positive effects on export performance, but higher levels may be counterproductive. Results also showed that related product diversification has a positive effect on firm export performance and a negative moderating effect on the relationship between inter-regional diversification and export performance. In the case of intra-regional diversification, we did not find any moderating effect from product diversification. By focusing on firms from the agricultural sector based in an emerging economy, this study offers practical implications for firm managers, trade organizations and private export associations, that may also be applicable to other export-based activities and emerging economies.     

Market Microstructure and Real Estate Returns

This paper examines the Real Estate Investment Trust (REIT) market microstruc-ture and its relationship to stock returns. When compared with the general stock market, REIT stocks tend to have a lower level of institutional investor participation and are followed by fewer security analysts. In addition, REIT stocks that have a higher percentage of institutional investors or are followed by more security analysts tend to perform better than other REIT stocks. Our results seem to confirm Jensen's ( 1993 , p. 868) proposition that ownership structure (that is, who owns the firm's securities) affects the value of the firm. Our findings also have implications about the well documented phenomenon that the financial performance of Commingled Real Estate Funds (CREFs) is better than that of REITs.     

Independent boards and the institutional investors that prefer them: Drivers of institutional investor heterogeneity in governance preferences

Institutional investors report that they prefer to invest in firms with greater board independence despite the fact that researchers have been unable to demonstrate a link between board independence and firm performance. We investigate whether differences among institutional investors affect these preferences. We find that trading strategies have some effect but that mutual funds—facing the strongest institutional pressures—have significantly stronger preferences for firms with greater board independence than do other types of institutional investors. This suggests that institutional investor preferences for independent boards are at least partially driven by institutional pressures rather than anticipated reductions in agency costs. Copyright © 2013 John Wiley & Sons, Ltd.     

How does firm experience and institutional distance impact ownership choice in high‐technology acquisitions?

One of the critical reasons for a firm to acquire other firms is to access new technology. This study seeks to understand what ownership position a firm should take in foreign markets if the target is in a high‐technology industry. Specifically, it looks at how firm‐level experience and institutional distance could impact this ownership. Using logistic regression models on a sample of 1,091 cross‐border acquisitions undertaken by firms from 36 countries over an 8‐year time period (2001–2008), we find that when firms acquire targets in a high‐technology industry, they resort to partial acquisitions. Our analysis further suggests that when firms seek targets in high‐technology industries but have experience with acquisitions or face higher institutional distance, the likelihood of full acquisitions over partial ones increases. Study findings contribute to our understanding of the interactive relationship among technology, experience, and institutional distance in determining appropriate ownership choices.     

How do interdependencies among human‐capital deployment,development, and diversification strategies affect firms' financial performance?

Using key insights from the resource‐based view of the firm, we develop and test a theory of how firms can successfully deploy and develop their strategic human assets while managing the trade‐offs in their service and geographical diversification strategies. In a sample of large law firms we find that, even though firms profit from expert human‐capital leveraging strategy and service and geographical diversification strategies individually, pursuing these strategies simultaneously at high levels produces negative interaction effects on firm profitability. In addition, the internally developed, firm‐specific associate human capital strategically fits better with high levels of expert human‐capital leveraging. While lateral hiring helps firms build new knowledge bases and take advantage of growth opportunities, pursuing high levels of both expert human‐capital leveraging and lateral hiring of associates results in lower profitability. To fully capture the economic benefits from strategies of diversification, human‐capital leveraging and lateral hiring, firms should understand and manage the complex interdependencies among multiple levels of strategy. Copyright © 2005 John Wiley & Sons, Ltd.