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.