The Effect of Holding Investment Real Estate on Firm Value : Case of Firm Size

This study analyzed the effect of investment real estate held by firms on the value of the firm. I confirmed that the effect of investment real estate on the value of a firm depends on the size of the firm by associating the probability of an agency problem with the size of the firm. The results of the study are as follows. First, the size of investment real estate held by a firm and the firm value showed a significant negative relationship. Second, during the financial crisis, no significant negative relationship showed between investment real estate and firm value. Finally, the analysis conducted by dividing the size of firms into four quartiles confirmed that the larger the firms, the more significant negative relationship between investment real estate and the value of the firm. These results show that holding investment real estate can be a factor in increasing the occurrence of agency problems and decreasing the firm value. As the size of the firm increases, the degree of diversification of information is higher and the discretion of the manager becomes greater. Therefore, it is understood that the negative relationship between the holding investment real estate and the firm value becomes larger because the agency problem is more likely to occur.