Board composition, executive remuneration, and corporate performance: The case of REITs

Abstract

This study strives to take an extra step to sharpen the comprehension of one aspect of agency theory as well as to extend previous research by examining the role of board of directors and managerial remuneration in enhancing corporate performance in the REITs industry. The main hypothesis in this study will be twofold. First, managerial remuneration is related to corporate performance. Second, the ratio of outside directors is related to corporate performance. This study will use a sample of REIT firms as of the end of 1996. The sample will consist of the actively traded REITs listed in the public stock exchanges. The final sample that meets all the criteria includes 167 REITs. The results indicate that there is a negative relationship between cash managerial remuneration and firm performance. Moreover, this study confirms a nonlinear relationship between board size and firm performance. The relationship is negative when board size is small, and it turns positive when board size grows.