ABSTRACT
Chapter 6 analyzes earnings management, asset-quality management and incentive-effects management pertaining to REITs and in RECs (non-REIT companies that own substantial real estate). The chapter introduces testable Psychology and behavioral Operations Research hypothesis/theories of human biases, Operations Gaps, Contract Theory, enforcement patterns and “Structural Effects” (including Game Theory and antitrust related hypothesis). Since REITs and some regulated-RECs are subject to stringent regulations and accounting biases, such entities have substantial incentives to manipulate their reported earnings, cash flow and assets; all of which can cause information asymmetry and have Financial Stability and Industrial Organization implications.
