Advisor Choice in Asia-Pacific Property Markets

Advisor Choice in Asia-Pacific Property Markets This paper examines advisor choice decisions by publicly traded REITs and listed property companies in Asia-Pacific real estate markets. Using a sample of 168 firms, we find robust evidence that firms strategically evaluate and compare the increased agency costs associated with external advisement against the potential benefits associated with collocating decision rights with location specific soft information. Our empirical results reveal real estate companies tend to hire external advisors when they invest in countries: 1) that are more economically and politically unstable, 2) whose legal system is based on civil law, 3) where the level of corruption is perceived to be high, and 4) when disclosure is relatively poor. Additionally, we find the probability of retaining an external advisor is directly related to the expected agency costs. Lastly, we find evidence of return premiums in excess of 13 % for firms whose organizational structure matches their investment profile. As such, we conclude that the decision to hire an external advisor represents a value relevant trade-off between the costs and benefits of this organizational arrangement. The Journal of Real Estate Finance and Economics Springer Journals

Advisor Choice in Asia-Pacific Property Markets

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Springer US
Copyright © 2012 by Springer Science+Business Media New York
Economics / Management Science; Regional/Spatial Science; Finance/Investment/Banking
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