Corporate Governance, Ownership Structure, and Credit Ratings of Hospitality Firms

Abstract

This study examines interrelated connections of corporate governance, ownership structure, and credit ratings. From the agency relationship perspective, the study analyzes this multiple association by accounting for firm-specific and ownership characteristics for the period between 1990 and 2007. In this context, logistic functions are used in regression models to predict the probable outcomes of these multiple relationships. Primary findings of this study revealed that hospitality firms with higher anti-takeover provisions (less shareholder power) enjoy higher credit ratings. Findings also revealed high coefficients of Gompers, Ishii, and Metrick (2003) index (the GIM index), suggesting that hospitality firms have strong governance provisions, reduced agency conflicts, and higher chances of getting better credit ratings.

The impact of filing micro-entity accounts and the disclosure of reporting accountants on credit scores: an exploratory study

“…Due to the difficulty in interpreting the effects of ordered probit model coefficients (Greene and Hensher 2009, p. 113), ordered logit models are often employed in accounting studies (e.g. Ashbaugh-Skaife et al 2006, Altin, Kizildag andOzdemir 2016). In particular, as shown below, the log odds coefficients of the ordinal logit model can be readily interpreted in terms of odds ratios (e.g.…”

Corporate Investment and Hotel Firm Value: Does Corporate Governance Matter in Financially Constrained Firms?

“…Analyzing whether acquisitions do indeed create value for both acquirers and targets in the hotel industry, Canina and Kim (2013) found contrary evidence suggesting that hotel firms overpay in acquisitions for reasons other than the potential synergy effects. Recently, Altin et al (2016) showed that CEOs of hospitality firms with weaker shareholders’ rights can use their power to make corporate investments that essentially benefit them but not necessarily the shareholders. Overall, managers of hotel firms protected with more ATPs may waste firms’ resources by investing in subpar NPV projects, and hence, corporate investments are expected to be of lower value in poorly governed hotel firms.…”

“…Guillet and Mattila (2010) showed that hospitality firms on average have weaker shareholders’ rights, suggesting that the majority of hospitality firms are poorly governed. In a recent study, Altin, Kizildag, and Ozdemir (2016) showed that hospitality firms with weaker shareholders’ rights receive higher credit ratings, indicating that CEOs of poorly governed hotel firms can easily raise funds to make investments that possibly increase their personal wealth. Nevertheless, the role of corporate governance in the relationship between corporate investment and firm value has not been previously investigated in hospitality literature.…”

The Effects of Insider Ownership and Board Composition on Firm Performance in the Restaurant Industry

“…The effect of the corporate governance mechanism on a firm's strategic choices and performance has been widely discussed in the mainstream of finance and strategic management literature since the 1970s (e.g., Jensen & Meckling, 1976;Kesner & Dalton, 1985). However, the characteristics of the hospitality industry, such as higher levels of agency problems (Oak & Iyengar, 2009) and high sensitivity to changes in environments (Guillet & Mattila, 2010), demand a more effective corporate governance system, leading to increased attention to corporate governance in the hospitality industry (e.g., Altin, Kizildag, & Ozdemir, 2016;Chen, Hou, & Lee, 2012;Kwansa, Song, Sharma, & Gong, 2014). In particular, ownership structure is a core component of corporate governance mechanisms (Jensen & Meckling, 1976).…”