Return enhancing, cash-rich or simply empire-building? An empirical investigation of corporate real estate holdings

Du, Julan and Leung, Charles Ka Yui and Chu, Derek (2013): Return enhancing, cash-rich or simply empire-building? An empirical investigation of corporate real estate holdings.

Abstract

No, we find no evidence for a return-enhancing role for corporate real estate holdings, which is consistent with the previous literature. Instead, our study based on a sample of U.S. listed corporations suggests that corporate real estate holdings are a form of managerial “empire building”. Corporations with weaker corporate governance and a lower degree of financial constraint tend to have higher real estate holdings, whereas higher real estate holdings are associated with lower returns to shareholders. The impact of corporate governance on corporate real estate holdings seems to be stronger in manufacturing-related industries. Implications and future research directions are discussed.

• Item Type: MPRA Paper
• Language: English
• Keywords: corporate real estate, empire-building, corporate governance, financial constraint
• Subjects: G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice ; Investment Decisions; D - Microeconomics > D2 - Production and Organizations > D22 - Firm Behavior: Empirical Analysis; G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General

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