Presenter: Stefan Hirth, AU

Title: CEO Connectedness, Managerial Discretion, and Firm Value: Evidence from Real Estate Investment Trusts

Abstract: We examine how appointment-based CEO connectedness affects firm value using U.S. Real Estate Investment Trusts (REITs). While connected CEOs are often observed in higher-valued firms, we show that increases in connectedness within a firm are associated with lower valuation when managerial discretion is high. The REIT setting uniquely allows us to observe detailed property-level portfolio composition, enabling direct tests of how connected management teams structure asset holdings. We find that the negative valuation effect of CEO connectedness is concentrated in firms with greater asset allocation discretion. In particular, connectedness interacts with portfolio diversification to reduce valuation. These results indicate that the costs of connectedness arise when internal monitoring is weak and managers have greater discretion over asset structure. By exploiting granular asset-level portfolio data, we provide direct evidence on how internal governance shapes portfolio decisions and firm value.

Organizers: Stefan Hirth and Mads Markvart Kjær