Linkage of Executive Stock Ownership and Focus on Financial Performance: An Empirical Review on US (Real Estate Investment Trusts (REITs)

Abstract: 

In this research, we examine the effect of managerial ownership on the financial performance of REITs from the US financial market. Our results demonstrate that there is a positive relationship between focus and financial performance in this sector that are consistent with the findings in current literature. Impact of managerial ownership, however, is weak on REITs performance providing direct support for the convergence-ofinterests hypothesis. We also examine the curvilinear relationship between firm performance and managerial ownership already documented in the literature. We find no support of any relationship in the REITs sector providing evidence against the entrenchment hypothesis. In addition, when agency conflicts drive the increase in focus strategy is investigated, we find that the agency conflict explanation for increase in focus strategy is warranted.

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