Theses and Dissertations

Issuing Body

Mississippi State University


Highfield, Michael J.

Committee Member

Nagel, Gregory L.

Committee Member

Rigsby, John

Committee Member

White, Larry

Committee Member

Campbell, Randall

Date of Degree


Document Type

Dissertation - Open Access


Business Administration (Finance)

Degree Name

Doctor of Philosophy


College of Business and Industry


Department of Finance and Economics


This research examines the relation between incentive-based compensation and subsequent Real Estate Investment Trust (REIT) performance as well as the determinants of incentive-based compensation for REITs. I propose that REITs either rely on incentive-based compensation to substitute for poor corporate governance practices or may not need to rely excessively on incentive-based compensation to align managers and shareholder interests, given their heavily regulated nature and their corporate governance practices. Using a sample of publicly traded equity, hybrid, and operating REITs for the 1999-2003 period, I find a negative relation between incentive based compensation awards and subsequent stock returns for REITs. Interestingly, this relation is not found when return on assets (ROA) is the measure of performance. These results imply that excessive incentive-based compensation negatively impact future REIT performance from a market perspective, but not an accounting perspective. With regard to the determinants of incentive based compensation, I find that CEO ownership, board of director characteristics, and institutional ownership are consistent determinants of the level of incentive based compensation awarded to REIT CEOs. Overall, the results imply that REIT corporate governance practices substitute for incentive-based compensation, but still, the level of incentive-based compensation paid to REIT CEOs is excessive up to the point that it negatively affects subsequent REIT performance.