How Does Corporate Governance Affect the Quality of Investor Information? The Curious Case of REITs

Recent research suggests that the unique legal and organizational structure of REITs, relative to other types of corporations, may vitiate the need for and the effectiveness of internal corporate governance. Our results indicate that information asymmetry, as measured by the percentage bid-ask spreads demanded by the market, is reduced by appropriately structured REIT governance. Using data during the 2003-2006 period, we find that increasing the financial incentives for board members reduces asymmetric information, and that the combination of experienced board members and independent audit committees with financial expertise diminishes asymmetric information.