The impact of corporate governance and corporate social responsibility on SA REITs’ performance

ABSTRACT

Corporate governance (CG) is one of the most sought after areas of research globally. This paper employs a corporate governance index (CGI) formulated from the KING III and IV reports to examine the link between corporate performance and the quality of CG and corporate social responsibility (CSR) of SA REITs listed on the Johannesburg Stock Exchange (JSE). The CGI index is created from King III and IV to measure the compliance of 33 SA REITs listed on the JSE as of January 2023. These REITs are assessed from 2013. The empirical investigation using multiple correspondence analysis (MCA) reveals that CG practices have a positive influence on firm performances measured by TSR (such as total share return). The results imply that CG’s standard principles influences the firm performance of SA REITs with a higher magnitude. The CSR index is created from the King reports, and the MCA was also used. This indicates that an SA REIT that complies with CSR regulations will improve returns.

KEYWORDS:

• Corporate governance
• corporate social responsibility
• REITs
• performance

Disclosure statement

No potential conflict of interest was reported by the author(s).

Supplementary material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/09599916.2024.2357108

Notes

1. SA real estate companies operated as PUT/PLS, and differed from REITs structurally, particularly in areas of legal, tax, and legislation matters (Olaleye & Wood, 2011, pp. 272–282). In 2011, SA joined the BRICS nations, in 2013, the REIT structure was enacted which has resulted in SA being in the category of emerging markets with regards to REITs.

2. MCA (Multiple Correspondence Analysis) is a dataset analysis tool used for categorical data, and it detects underlying structures in a dataset. This was first introduced by the mathematician, Benzéri, in the 1960s and the 1970s in France. This tool is an improvement on the PCA and the CA. the PCA is used for large datasets containing high number of dimensions and the CA is a multivariate statistical technique like the PCA which applies to categorical rather than continuous data.

3. CSR is taken from the annual reports. Prior evidence suggests that they are positively related with the level of disclosure provided through other mediums (C. G. Ntim et al., 2012). Annual reports are not a direct variable; however, after the King IV report of December 2016, companies are required to show this in their income statements.

Additional information

Notes on contributors

Nosipho Moloi

Nosipho Moloi is currently a lecturer and PHD candidate for property studies in the school of construction economics and management at the University of the Witwatersrand.

Omokolade Akinsomi

Omokolade Akinsomi is currently an Associate Professor of property studies in the school of construction economics and management at the University of the Witwatersrand

Woei Chyuan Wong

Woei Chyuan Wong is currently an associate Professor of property studies in the Universiti Utara, Malaysia