The Relationship Between Corporate Governance and Real Estate Investment Trust (REIT) Performance in Abuja
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Background of the Study
Corporate governance refers to the structures and processes through which organizations are directed and controlled, including the relationships among stakeholders, the board of directors, and management (Oluwole & Adeoye, 2023). In the real estate sector, corporate governance is particularly crucial for maintaining investor trust, ensuring transparency, and promoting long-term financial success. Real Estate Investment Trusts (REITs) have become an essential part of the Nigerian property market, offering investors a way to access real estate assets without owning properties directly (Afolabi & Adebayo, 2024). These investment vehicles have gained popularity in Abuja, Nigeria’s capital, as they provide diversified exposure to real estate while offering liquidity and professional management.
The performance of REITs is influenced by several factors, with corporate governance being one of the most critical determinants (Agboola & Ijaiya, 2023). Well-governed REITs are more likely to provide stable returns to investors, maintain regulatory compliance, and manage risks effectively (Hassan et al., 2024). However, despite the growing significance of REITs in Abuja’s real estate market, there is a lack of empirical research into the specific impact of corporate governance on their performance. In Abuja, where the real estate market is characterized by a mix of commercial and residential developments, understanding the role of governance structures in shaping REIT performance is vital for investors, regulators, and policymakers (Adepoju & Obafemi, 2023).
Corporate governance practices such as board independence, transparency, and accountability have been shown to contribute to higher operational efficiency and profitability in various sectors, including real estate (Obi & Okorie, 2024). This study will examine the relationship between these governance practices and the financial performance of REITs in Abuja, contributing to the body of knowledge on real estate investments in emerging markets.
Statement of the Problem
Although REITs are an important vehicle for real estate investment in Abuja, the performance of these trusts remains inconsistent, with some experiencing poor returns despite the region’s growing real estate market. This inconsistency has been linked to weaknesses in corporate governance, such as inadequate board oversight, lack of transparency, and ineffective risk management (Oluwole & Adeoye, 2023). There is a need for in-depth research to explore how corporate governance practices impact the performance of REITs in Abuja, providing insights that can improve investor confidence and enhance the overall stability of the market.
Current literature on REITs in Nigeria largely focuses on their financial performance but overlooks the critical role of corporate governance in shaping this performance. This study will fill this gap by analyzing how different corporate governance mechanisms affect the operational and financial outcomes of REITs in Abuja, offering actionable recommendations for improving governance practices in this sector.
Objectives of the Study
1. To assess the relationship between corporate governance practices and the performance of REITs in Abuja.
2. To evaluate the impact of board independence, transparency, and accountability on the financial performance of REITs in Abuja.
3. To identify the key corporate governance challenges faced by REITs in Abuja and propose solutions to improve their performance.
Research Questions
1. How do corporate governance practices influence the performance of REITs in Abuja?
2. What is the effect of board independence, transparency, and accountability on REIT performance in Abuja?
3. What corporate governance challenges do REITs face in Abuja, and how can these challenges be addressed?
Research Hypotheses
1. There is a significant positive relationship between corporate governance practices and the performance of REITs in Abuja.
2. Board independence, transparency, and accountability significantly affect the financial performance of REITs in Abuja.
3. REITs in Abuja face significant corporate governance challenges that hinder their performance.
Scope and Limitations of the Study
This study will focus on the relationship between corporate governance and the performance of REITs in Abuja. It will specifically examine governance structures within REITs listed on the Nigerian Stock Exchange (NSE). Limitations include the potential lack of transparency in the governance practices of some REITs and the difficulty in accessing reliable financial performance data from these trusts. The study will not include REITs outside Abuja, limiting its generalizability to other regions of Nigeria.
Definitions of Terms
• Corporate Governance: The system of rules, practices, and processes by which a company is directed and controlled, ensuring accountability, fairness, and transparency (Oluwole & Adeoye, 2023).
• Real Estate Investment Trust (REIT): A company that owns, operates, or finances income-producing real estate, allowing individual investors to pool their capital in real estate investments (Afolabi & Adebayo, 2024).
• Board Independence: The degree to which the board of directors is composed of individuals who are not part of the company’s executive team, ensuring impartiality in decision-making (Hassan et al., 2024).
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