Sponsor Ownership and Stock Price Crash Risk －Evidence from Asian REITs

We investigate whether an increase in sponsor ownership can decrease stock price crash risk by mitigating agency problems. In Asian real estate investment trusts (REITs), sponsors assume indirect control by taking ownership of companies that externally manage REITs. Thus, there is a higher chance of agency problems in Asian REITs because external managers might be motivated to operate the REITs according to the sponsor’s interest, thereby increasing stock price crash risk. Our results show a significant negative relationship between sponsor ownership and stock price crash risk. We argue that sponsor ownership and connection to the government should be considered in the risk analysis of Asian REITs.