Green building, cost of equity capital and corporate governance: Evidence from US real estate investment trusts

Hui Ching Hsieh, Viona Claresta, Thi Minh Ngoc Bui

Research output: Contribution to journalArticlepeer-review

16 Citations (Scopus)


Distinct from the existing literature, which mainly focuses on the impacts of green building practices on the owners' benefits, this paper examines capital market participants' perceptions of green building, specifically, the cost of equity capital. The study uses data regarding the United States Real Estate Investment Trusts (US REITs) from 2000 to 2016, employing a panel regression analysis and adopting a Price Earnings Growth (PEG) ratio model for the cost of equity capital estimation. We find a negative relationship between green building certification and the cost of equity capital. Our results encourage REITs to participate in green building certification and aim for higher green building rankings. In addition, we examine whether corporate governance could affect the intensity of green building practices in REITs. It is found that corporate governance practices implemented to align shareholders' and managers' interests, such as higher institutional holdings and a less dispersed ownership structure, positively impact firms' resource allocation for green initiatives. The results suggest there could be mutual benefits for both economic profits and sustainable buildings.

Original languageEnglish
Article number3680
JournalSustainability (Switzerland)
Issue number9
Publication statusPublished - 2020 May 1

All Science Journal Classification (ASJC) codes

  • Geography, Planning and Development
  • Renewable Energy, Sustainability and the Environment
  • Environmental Science (miscellaneous)
  • Energy Engineering and Power Technology
  • Management, Monitoring, Policy and Law


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