Abstract
South African Real Estate Investment Trusts (REITs) play an important role in driving
economic growth and providing substantial investment opportunities. However, their
performance is associated with corporate governance practices which have garnered increasing
attention from researchers and policymakers. This study examined the complex relationship
between corporate governance and the performance of South African REITs listed on the
Johannesburg Stock Exchange (JSE) from 2013 to 2021. Recognising the critical role of
effective governance in enhancing firm value and sustainability, this research aimed to fill the
gap in the literature by providing comprehensive insights into the governance-performance
nexus within this unique sector. This study employed an explanatory sequential mixed-methods
approach, integrating quantitative and qualitative techniques. The quantitative analysis used
pooled ordinary least squares (OLS), fixed effects (FE), random effects (RE), and generalised
method of moments-difference (GMM-Diff) models on Eviews® version 11 software. The
qualitative insights were derived from semi-structured interviews analysed using the
Computer-Assisted Qualitative Data Analysis Software (CAQDAS) NVivo version 14. In the
quantitative phase, the study examined the relationships between board characteristics (board
activity, size, independence, tenure), audit committee effectiveness (independence, activity),
board diversity (race, gender, education), and the board-level governance index (GOV10) with
the REIT performance. A final sample of 30 REIT companies listed on the JSE represented
81% of the South African REITs sector. The findings reveal that active board engagement
positively impacts REIT performance, evidenced by increased funds from operations per share
(FFO P/S), return on equity (ROE), and earnings per share (EPS). Board independence also
enhances performance variables, such as dividend yield (DIV_YIELD), return on asset (ROA),
and ROE. Conversely, longer board tenures and larger board sizes generally detract from
performance, particularly affecting ROA, ROE, and EPS negatively. Audit committee
independence presents mixed results, positively affecting DIV_YIELD but negatively
impacting ROE and EPS. Similarly, audit committee activity shows negative effects on
performance, except for a positive influence on ROE. The board diversity findings are nuanced.
Racial diversity positively influences REIT performance except EPS, while gender diversity
has a negative impact on FFO P/S and ROA but positively affects return on invested capital
(ROIC) and EPS. Educational diversity shows no significant effect on most performance
measures, with a slight negative impact on EPS. The governance index (GOV10) generally
shows a positive association with FFO P/S, DIV_YIELD, and ROA, indicating that higher
V
governance standards enhance REIT performance. Qualitative insights on NVivo-analysed
interviews with industry experts enrich these quantitative findings, offering varied perspectives
on governance effectiveness, board composition, and audit committee independence. The
participants advocate for a balanced board composition that embraces diversity in race, gender,
and educational backgrounds, promoting inclusive decision-making while managing
challenges associated with board size and tenure. This study significantly advances
stewardship, resource dependence, agency, and institutional theories by demonstrating the
positive impacts of active board involvement and independent directors on performance while
highlighting the drawbacks of prolonged board tenures. Moreover, it emphasises the need for
region-specific governance frameworks tailored to South Africa's unique regulatory, cultural,
and economic environment. Policy recommendations are provided to enhance governance
practices within South African REITs, suggesting optimal board activity, size, and
composition. The study advocates for policies that balance board independence and tenure,
prevent entrenchment, and promote diversity and inclusion. It also calls for standardised
governance indices incorporating ESG factors to improve governance comparisons and
practices. Methodologically, the study showcases the effectiveness of a mixed-methods
approach, combining quantitative and qualitative data for a comprehensive analysis of
governance dynamics. The robust statistical analysis complemented by in-depth qualitative
insights, ensures the findings' reliability and practical relevance. Despite valuable insights, the
study acknowledges limitations, such as sample size, potential selection bias, and the subjective
nature of qualitative research. Future research is encouraged to expand on these findings and
explore the evolving nature of governance practices and their impact on REIT performance.
Keywords: REITs, performance, governance, board, independence, diversity, JSE, audit
committee, South Africa.