Discussion Paper: Triangulation of Methodology to Solve the Practitioner - Academic Debate Concerning the Value of Research

In support of research in the debate concerning its relevance to hospitality academics and practitioners, the author presents a discussion of how the philosophy of science impacts approaches to research, including a brief summary of empiricism, and the importance of the triangulation of research orientations. Criticism of research is the hospitality literature often focuses on the lack of an apparent philosophy of science perspective and how this perspective impacts the way in which scholars conduct and interpret research. The Validity Network Schema (VNS) presents a triangulation model for evaluating research progress in a discipline by providing a mechanism for integrating academic and practitioner research studies

Insider Trading Prior To Hospitality Acquisition Payment Type Announcements

This study examines evidence of whether hospitality insiders use personal private information to maximize their private benefits prior to hospitality acquisition payment type announcements. The findings of this study, with few exceptions, do not support the hypothesis that hospitality insiders undertake abnormal insider trading using inside information about the true value of the acquiring firm when an acquisition payment type is announced. For hospitality acquiring firms using stock or cash financing to pay for the acquisition, the level of abnormal insider transactions in the four quarters prior to an acquisition payment announcement was not significant. However, for hospitality acquirers using mixed financing (cash and stock), abnormal insider sales were positive and significant in the four quarters prior to the announcement. The lack of significant results for the all cash or stock payment announcements may reflect legal constraint on insider trading, managerial control or compensation issues

Payment Type Offers and the Free Cash Flow Hypothesis in Hospitality Acquisitions

The purpose of study is to understand whether free cash flow is a determinant of the payment type offered by acquiring firms in hospitality acquisitions. According to the pecking order theory, investments are financed using internal funds first, new issues of debt second, and new issues of equity last in order to use the cheapest financing source possible. This is consistent with using free cash flow first in the financing of acquisitions. To test this hypothesis in the context of acquisition payment type offers, a measure of free cash flow was formulated and regressed against the type of payment offer used by hospitality acquirers. Other motivators of cash financing were also tested in the model. Small firms tend to have large cash holdings and often limited access to the capital markets. Thus we tested the relationship between the acquirer’s use of cash financing and size of acquirer. In addition, hospitality firms with strong growth opportunities hold significant cash balances to provide the flexibility to pursue positive NPV investment. Thus we included a measure of the acquirer’s growth opportunities as well. The results of the model indicated that larger hospitality firms and hospitality firms with low growth opportunities tend to use cash financing in their acquisitions

Explanations for the Predominant Use of Cash Financing in Hospitality Acquisitions

Seventy-five percent of hospitality acquisitions were cash-financed from 1980 to 2000. In other industries this figure has been closer to 43%. Since the choice of cash versus stock financing can have a significant effect on a hospitality acquire‘s capital structure, the purpose of this study was to examine possible explanations for the high level of cash financing used in hospitality acquisitions. The results indicate that in both the hotel and restaurant industries, the use of cash payments in acquisi-tions is positively related to the acquiring firm’s debt ratio. Firm size is also positively related to the use of cash payments but only in the restaurant industry. Free cash flow and internal growth opportunities do not appear to be significant determinants of the use of cash payments in acquisitions in the hospitality industry

Detecting Informed Trading around Hospitality Acquisition Announcements using the Market Microstructure Approach

When managers perceive an under- or overvaluation prior to the announcement of a hospitality acquisition payment, they may personally buy or sell their firm’s shares. In addition to managers, other informed traders (e.g., value traders, technical traders, arbitrageurs) may undertake transactions through their personal accounts prior to announcing an acquisition payment. The results for informed trading show that a market maker tries to avoid losses inflicted by informed traders. For cash- or stock-financed acquisitions, the bid-ask spread does not change, but the ask or bid depth narrows significantly prior to the acquisition payment announcement. The specialists reduce the bid depth to keep an informed trader from selling in the case of a stock-financed acquisition. The specialists reduce the ask depth to keep an informed trader from buying in instances of cash- and mixed-financed acquisitions. While the bid-ask spreads do not reveal significant changes prior to the acquisition payment announcement, the depths narrow in the same period because the depth measures informed buying and selling separately as the ask and bid depths, but the spread includes both informed buying and selling together

An examination of cash holding policies in U.S. casino firms

The purpose of this reason is to examine the cash holding policies of U.S. casino firms. More specifically, we attempt to understand why casinos hold the amounts of cash that they do and what the implications of these policies are. Our results support the notion that risky dividend-paying firms hold more cash. However, we find that there is no relationship between risk and cash holdings for all firms. Furthermore, we find that casino firms that use more debt tend to hold more cash. This is the opposite finding in the literature and is worthy of further investigation

Do Institutional Investors Favor Lodging Firms with Greater Brand Equity?

The purpose of this research is to investigate institutional investment behavior regarding lodging firms and their brand equity. If these investors favor firms with higher brand equity, then this could influence the management of lodging firms to pay closer attention to increasing the brand equity of their firm. Our study showed there is a positive and significant relationship between advertising expenditures and the percentage of lodging stocks owned by institutional investors. There is a highly significant difference in the institutional investor percentage between firms that make advertising expenditures and those that don’t

Institutional Investors and International Expansion in Restaurant Industry

Although U.S. restaurant firms face high risks in diversifying their operations internationally, there are no previous studies that motivate international diversification. If international diversification is risky then why do restaurant firms go abroad? This study focuses on one potential explanation, namely the institutional investor ownership, to determine if it can explain the internationalization behavior in the restaurant industry. According to previous research, ownership by pressure-sensitive groups (bank and insurance firms) are negatively related to international diversification and ownership by pressure-resistant groups (pension fund, mutual fund, and brokerage firm) are positively related to international diversification. The results for restaurant firms, reported in this study, partially confirm previous findings. While pension and mutual fund firms support international diversification, pressure from investments by banking firms leads to lower international diversification. Investments from Insurance firms are not related to international diversification whereas investments by brokerage firms are negatively related to internationalization

Insider Trading Around Hospitality Acquisition Announcements

Despite the debate over the level of market efficiency in financial markets and the importance of information asymmetry, little research has been conducted in the hospitality industry regarding the process of insider trading. Hospitality acquisition announcements provide a particularly interesting opportunity to explore how the private information of insiders is conveyed to stock prices. If an acquiring firm\u27s managers (insiders) have knowledge that their firm is overvalued (and anticipate that their shares will underperform after the acquisition), they may propose a stock-financed acquisition. In such a situation, insiders may also try to earn abnormal personal profits by selling some of their private holdings of the firm\u27s securities before the acquisition announcement. If insiders perceive their firm\u27s shares as undervalued, they may propose an all cash acquisition and try to purchase shares prior to the acquisition announcement. If insiders perceive their firm\u27s shares as fairly valued, they may propose a mixed (cash plus stock) financed acquisition and may not make abnormal sales or purchases prior to the acquisition announcement. The findings on insider trading do not consistently support the theory that insiders in hospitality firms invariably use their private information to maximize their private benefits prior to acquisition payment announcements. For hospitality acquiring firms using stock or cash financing, insider trading did not result in significant abnormal transactions in the four quarters prior to acquisition payment announcements. For hospitality acquirers using mixed financing, abnormal insider sales are positive and significant. The lack of significant results for the all cash or stock payment announcements may reflect a maximizing of managerial control or compensatio

Efficiency in Hotel Real Estate Market

The purpose of the study is to test for the existence of market efficiency in the hotel real estate market by looking at how rapidly prices in hotel real estate markets are diffused in geographically closed markets. This study also measures the profitability associated with using trading rules based on recent price changes in nearby hotel real estate markets. Since only a few cities show a significant relationship between other cities\u27 lagged hotel real estate returns in the same geographical area, the empirical results of this study provide evidence in favor of general hotel real estate market efficiency. However, we did find several possibilities of arbitrage profits due to non-synchronous price adjustments in two of the hotel real estate markets examined