Date of Award

Spring 2002

Document Type


Degree Name

Doctor of Business Administration (DBA)


Economics and Finance

First Advisor

Roger Shelor


This study has a threefold purpose. Its first objective is to investigate input and output efficiencies in the Real Estate Investment Trust (REIT) industry. Its second objective is to understand the impact of size, property share, loan production, debt ratio, property and geographic diversification, control and governance variables, overall risk, capital risk, growth rate, and management type on a number of efficiency measures, including profit, cost, allocative, technical, pure technical and scale efficiency. The third objective is to assess the impact of structural and regulatory changes in the industry on REITs' productivity, technology, and efficiency changes.

I have estimated the REITs' efficiency in the period 1989–1999 by employing a nonparametric approach, namely Data Envelopment Analysis (DEA), along with a parametric approach, the Stochastic Frontier Approach (SFA). Results suggest that the average efficiency for all indexes is very low, implying waste of REIT resources and potential profits. Results also indicate that the dominant source of inefficiency in REIT industry is due to technical inefficiency rather than allocative inefficiency. Pure technical inefficiency is generally larger than the scale inefficiency, suggesting that the dominant source of overall technical inefficiency is mainly due to pure technical inefficiency.

Several conclusions emerge from second stage regression analysis, which examines the efficiency variations. First, robust capitalization and higher loan production bear a positive relation to REITs' efficiency. Second, the growth rate in their assets impacts positively on cost, technical, pure technical, and scale efficiencies, but negatively on profit efficiency. Third, REITs with more market power (higher property share) experience lower cost, technical, scale, and profit efficiencies. In addition, REIT efficiency decreases with higher debt. Finally, those REITs having separate management (decision) and board (control) structures are more efficient than those REITs with the same management and board.

I also examined the REITs' productivity change relative to both fixed reference technology and successive reference technology. The results suggest that REIT efficiency increases due to both scale efficiencies and better management practices; whereas their productivity generally decreases because of experiencing technical regress. I conclude that greater efficiency and technical improvement could both be achieved by the adoption of appropriate regulations.