The performance of externally managed REITs in Asia

This paper examines the impact of free cash flow on the agency costs and how these free cash flow and agency costs affect the performance of REITs in Asia. Unlike previous studies that focus on conventional non-regulated industry, the Asian REIT industry being a highly regulated industry provides a new context for further research. The results indicate that free cash flow and agency costs persist over time in Asian REITs even though REITs are in a highly regulated industry. The findings also imply that REIT managers face substantial costs when they wish to adjust to the equilibrium level of agency costs, whereby the optimum level is always dynamic and not constant over time and moves with the changes in the determinants of agency costs. These agency costs persist over time and have significant impacts on the performance of REITs in Asia