Real Estate Investment Trusts (REITs) Corporate Governance and Investment Decision-Making in the United Kingdom, South Africa and Nigeria

Adopting Real Estate Investment Trusts (REITs) has been relatively slow due to corporate governance issues and a limited understanding of investment decision-making processes. This study aims to enhance the performance of REITs by developing a Corporate Governance Scoring Framework and improving the investment decision-making process. A mixed-method research strategy was employed to gather data on investment decisionmaking processes and corporate governance in the UK, SA, and Nigeria from 2014-2019. Qualitative data was collected through semi-structured telephone interviews with key decision-makers in the three regimes and analysed using content and discourse analysis techniques. Quantitative data was obtained from the annual financial reports of listed
REITs during the study period and analysed using OLS, fixed effects, and random effect models. The Integrated Corporate Governance Index (ICGI), a self-scoring framework,
was used to measure the quality of corporate governance strength.
The qualitative analysis identified four stages in the investment decision-making process: strategy, search, analysis and adjustment, and consultation or decision and review. The interviews revealed that the board, remuneration, and fee proxies were relevant factors across all three regimes, with audit and ownership also significant in the developing regimes of SA and Nigeria. The board's reputation, experience, and management role were highlighted as crucial during the decision-making process. Performance factors such as 'Operational Stability,' 'Tenant Quality,' 'Experience,' and metrics including 'Rental Income,' 'Dividend Payment,' and 'Yield' were identified. The quantitative analysis demonstrated that adherence to corporate governance codes was highest in the UK, followed by SA and Nigeria. Regression analysis results showed that a higher ICGI score improved return on assets (ROA) and return on equity (ROE) in the UK but not in SA and Nigeria. The index did not significantly impact firm value in the UK and pooled country analysis, but it led to better firm valuation in SA. In the Nigeria REIT regime, the ICGI harmed firm valuation. The study concluded that adherence to country-level corporate governance was more predictive of operational performance than firm valuation.
In summary, this study contributes to the existing knowledge by providing insights into the investment decision-making processes of REITs and the importance of corporate governance in improving their performance. The developed Corporate Governance Scoring Framework offers a valuable tool for evaluating the quality of corporate governance in REITs, but further refinement is necessary to keep up with evolving policies.