Publication Type

Journal Article

Version

submittedVersion

Publication Date

12-2022

Abstract

This paper examines the impact of fiduciary duties on collective asset sales in the case of owners acting as delegates for other owners, thereby potentially inducing conflicts of interests. Our identification strategy exploits a unique legal shock in Singapore, which established fiduciary duties in those transactions in the real estate market known colloquially as en bloc sales. The imposition of fiduciary duties caused the price premium of units sold via en bloc sales to increase over units ineligible for en bloc sale, as well as over units that, although eligible for en bloc sale, are sold individually. In addition, this valuation effect is stronger for projects with especially severe agency problems as proxied by high ownership turnover. This legal reform also affects the general private housing market beyond the en bloc premium: findings show that residential owners are increasingly willing to participate and reduce condominium turnover. Finally, we find that the stock price of public real estate developers responded positively to the legal reform, which indicates a possible overall positive welfare effect. Our study highlights the importance of judicial oversight for addressing agency conflicts in non-consensual asset-sale mechanisms.

Keywords

Acquisitions, Agency problem, Collective sale committee, En bloc sales, Fiduciary duties, Mergers

Discipline

Asian Studies | Property Law and Real Estate | Real Estate

Research Areas

Finance

Publication

International Review of Law and Economics

Volume

72

First Page

1

Last Page

14

ISSN

0144-8188

Identifier

10.1016/j.irle.2022.106093

Publisher

Elsevier: 24 months

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1016/j.irle.2022.106093

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