Abstract:
Efficient REIT management plays a vital role in the success of a particular REIT.
REIT managers concern over the efficiencies of REIT operation. Nevertheless,
inefficiencies of REIT still exist and this issue needs to be handled. Thus,
inefficiencies and scale economies measures of M-REIT (Malaysia Real Estate
Investment Trust) during the years 2006-2008 are estimated in this study. The model,
estimated via directional output distance function, accounts for both desirable output
(return) and undesirable output (risk) produced by a given inputs of managerial effort
and financial capital. The model establishes a risk/return frontier that defines the best
practiced management technology for REIT. The risk/return frontier can be used to
determine which of the 13 M-REIT operate on the frontier. The results suggest that
ignoring the effects of risk yields a management technology that is significantly
different from one that incorporates risk. Most of the M-REIT studied are in the range
of decreasing returns to scale (DRS). Hence, reducing the size of the REIT company
can improve the efficiencies of REIT operation.
