BUSINESS CYCLE AND LONG-TERM DEBT: EFFECTS ON HOTEL OPERATING LEASE

Over the last 25 years, many hotel operators have chosen to lease their property instead of owning as a financing strategy. This paper examines the combined and separate contributions of business cycles and a firm’s level of long-term debt on hotel owner/operator use of operating leases. The results indicate that operating leases were used more often during contracting business cycles and less often during cycles of expansion. According to the results, operating leases and long-term debt are not complementary, although they are increasingly treated as complements when the economy suffers a downturn

Board structure and CEO compensation: Evidence from U.S. lodging industry

Using a sample of U.S. lodging firms, this paper examines the relationship between board of director characteristics and chief executive officer (CEO) compensation. Previous research shows that larger boards are detrimental to the effectiveness of the board of directors and deteriorate the control imposed on CEO actions and pay. Board independence is also suggested as an important quality to emphasize the control on the CEO. We propose that U.S. lodging firms’ board of directors provide a nice setting to investigate the effects of size and independence on CEO compensation level. Our findings suggest that CEO compensation is not related to board size, and positively related to proportion of the outside board members. These findings are contrary to the findings of previous studies. Our findings may provide significant insights to lodging firms’ board of directors to structure efficient compensation packages.post-prin

Does risk matter in CEO compensation contracting? Evidence from US restaurant industry

The structure of compensation packages of Chief Executive Officers (CEOs) has been a significant research interest for researchers across various disciplines. In this paper, we examine a unique relationship between CEO compensation and risk (systematic risk) in the US restaurant industry. Our research question stems from the assumption that CEOs must be rewarded with a higher incentive-based compensation in high-risk profile restaurant companies in order to motivate them to perform in their full potential for mutual benefits of the CEO and shareowners. Furthermore, we investigate whether firm risk moderates the relationship between firm performance and CEO total compensation controlling for the firm size and CEO ownership. We draw our sample firms from the US restaurant industry. Findings of our study suggest that firm risk induces a higher proportion of incentive-based compensation for restaurant companies’ CEOs, and firm risk does not seem to moderate the relationship between pay and performance in the restaurant industry.post-prin

A synergy effect of internationalization and firm size on performance: US hotel industry

Due to copyright restrictions, the access to the full text of this article is only available via subscription.Purpose – The purpose of the current study is to investigate the existence of a negative synergy effect of internationalization and firm size on firm performance for publicly traded US hotels.Design/methodology/approach – The study performs the two-way fixed-effects model to investigate the proposed negative synergy effect.Findings – The findings do not support the proposed negative synergy effect, but support the positive synergy effect of internationalization and firm size on performance.Originality/value – This study examines the hypothesis developed based on the agency cost theory using the hotel industry's unique monitoring cost argument. However, findings support the opposite, implicitly suggesting that the hotel's monitoring cost in the international franchising context may not be severe as some expect

Compensation practices in the lodging industry: Does top management pay affect corporate performance?

Due to copyright restrictions, the access to the full text of this article is only available via subscription.The current study examines the relationship between executive compensation and firm performance in the U.S. lodging industry. It is not clear-cut whether performance leads to compensation or compensation drives firm performance. Our contention is that cash and lagged equity-based compensation drive the firm performance. Our findings suggest that chief executive officer's (CEO) contemporaneous cash-compensation and one-year lagged equity-compensation positively affect the accounting performance measures return on assets and Tobin's Q; but neither compensation components affects the market-performance measure, stock returns, in the lodging industry. Quantitatively similar findings are found for the chief financial officer (CFO). Further robustness test show that further lags of equity compensation of both named executives do not result in increased stock performance in the lodging industry

The role of internationalization on the IPO performance of service firms: Examination of initial returns, long-run returns, and survivability

Due to copyright restrictions, the access to the full text of this article is only available via subscription.This study examines the effect of internationalization on the initial and long-run IPO performance of service firms. The study discusses that pre-IPO internationalization of service firms contributes to the explanation of long-discussed IPO underpricing phenomenon, and underperformance of IPOs in the long-run. Sample of the study includes 1822 IPO issues conducted by US service firms between 1980 and 2009. Findings of the study suggest that international service firms leave less money on table in their IPOs compared to domestic service firms by providing significantly lower first day returns to their investors on their first day of public trading. Moreover, our findings provide evidence that 3-year cumulative abnormal returns and 3-year buy-and-hold returns of international service firms are significantly higher than domestic service firms, and international service firms outperform domestic service firms in both operating return on assets and operating cash flows in the post-IPO period. Lastly, the study documents that survival rate of service firms subsequent to an IPO issue increases with pre-IPO internationalization