Characteristics of Directors, Composition of Board Committees, and Firm Performance: The Case of U.S. Equity REITs

This paper investigates the composition of REIT board committees in terms of the real estate expertise of the directors, type of director, gender, and tenure and the impact of these characteristics on REIT performance. The sample comprises data at the director level for 65 U.S. equity REITs during the period of 2010-2019. Using chi-square tests and logistic panel regressions, I provide evidence that the profile of REIT board members varies depending on their assignment to different committees and that, overall, the average REIT director does not match the expected director profile of having significant real estate expertise or long board tenure. I also find that finance and investment committee members are directors with very different characteristics despite tat these committees are function-related advisory committees and real estate expertise is associated with investment committee membership only. Furthermore, using panel fixed effects regressions, I find that the composition of REIT committees matters for REIT performance, especially in the case of investment committees for which the presence of outside and inside directors with real estate expertise and long tenure is associated with higher REIT performance. To the best of my knowledge, this is the first study that investigates the composition of REIT board committees and its impact on REIT performance. The findings are of interest to researchers and practitioners as they show the key characteristics of directors for REIT monitoring and advisory committees and their effect on REIT performance, and this information can assist in the understanding of REIT board functioning and the designing of the optimal REIT board.