Mergers and acquisitions are frequent occurrences in the world of business. While a merged firm may convert an acquired asset to other brands, the restaurant industry tends to acquire the same brand name and does not change the name of the acquired assets. Acquisitions can prove to be a risky proposition in any industry. This study attempts to determine if a product-diversified acquisition in the restaurant industry is a value-creating decision. By comparing focused and diversified acquisitions, we try to find if focused acquisitions create value and that diversified acquisitions do not. Our initial expectation was that focused acquisitions create more shareholder value. We find that both focused and diversified acquisitions make significant positive abnormal returns for acquirers.

ABSTRACT The U.S restaurant industry has experienced strong growth since 1970 (National Restaurant Association, n.d.). Publicly traded restaurant firms tend to initiate dividends soon after they go public, quite often even in the same year. This study tests hypotheses based upon four dividend initiation theories: signaling, life-cycle, agency costs and catering. The results reveal that only the signaling theory is significant. Since most restaurant firms initiate dividends at the growth stage, they tend to have little free cash flow, high investment opportunities, and low dividend premiums (which are less favorable to investors).

ABSTRACT This paper utilizes the well-established Fama-French three-factor model to test whether franchising significantly and systematically influences restaurant firms' financial performance in the long term. Findings suggest significant, systematic, and consistent impacts of franchising on excess returns of restaurant firms, controlling for the Fama-French three factors and restaurant operation type in alternative long-term testing windows.

Corporate social responsibility (CSR) creates long-term shareholder value through managing risks from economic, environmental, and social developments. Among institutional owners, pension funds have a long-term investment horizon and can influence a firm's strategy. They promote CSR activities in the long run. Mutual funds and investment banks tend to have more of a short-term investment horizon. They are not strong supporters of CSR activities. Our results support the previous time horizon hypotheses. Although pension funds prefer CSR firms in the hotel and casino industry, mutual funds and brokerage firms had no interest in CSR firms. Pension fund and mutual fund ownership is negatively related to CSR firms in the restaurant industry. Brokerage firms are indifferent to CSR 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.

ABSTRACT The purpose of this research is to assess the elasticity of CEO compensation in the U.S. restaurant industry. Using a sample of 30 restaurant firms for the years 1993 through 2006, we find that a 1 percent increase in current year firm return yields an increase of approximately .43 percent for salary bonus, and stock options, .20 percent for salary and bonus, and 2.74 percent for bonus and options. Mergers do not appear to affect CEO compensation significantly. Our findings are within the range found by many previous researchers.

PurposeThe aim of this study is to investigate institutional investment behavior relating to lodging firms and their brand equity.Design/methodology/approachOrdinary least squares (OLS) and two‐stage least squares (2SLS) regressions are used. The dependent variable is institutional investor percentage and the independent variables are advertising expenditures, size, capital expenditures, proxy Q, debt ratio, price, share turnover and year.FindingsThe study found that institutional investors' holdings are positively related to advertising expenditures. There is a significant difference in institutional holdings between lodging firms with advertising expenditures and those without. Institutions favor lodging firms that have lower debt ratios. Institutional investors prefer small firms because they typically offer superior returns.Research limitations/implicationsFurther research may be done to see whether individual investors favor firms with brand equity. Additional research may be conducted in other segments, such as restaurants or casinos.Practical implicationsFindings may help lodging managers in raising financial capital from institutional investors; researchers in conducting future research on institutional investors; and educators in better describing institutional investors' important roles to hospitality students.Originality/valueThe paper is the first to show a relationship between institutional investors and advertising expenditures in the lodging industry.

ABSTRACT The existing hospitality literature describes how global diversification in the hotel industry looks for a broader presence regardless of existing global representation. However, the finance literature reports a negative impact from global diversification because of the potentially higher cost of coordinating corporate policies. Moreover, agency problems can increase along with the size of the firm. This study measures the wealth impact of hotel global diversification on bidders at the time of international acquisition announcements. We find significant abnormal positive returns on the day of the announcement. We also find that international acquisitions have lower abnormal returns than domestic acquisitions at the time of the announcement.

PurposeThe purpose of this paper is to understand whether budgetary controls at clubs have changed from the mid‐1980s to the first decade of the twenty‐first century.Design/methodology/approachThe survey instrument is mailed to the members of the Club Managers Association of America. The questionnaire includes demographic data as well as information on budgetary controls.FindingsFor control purposes, comparisons to the original budget and actual numbers during the current decade have increased significantly from comparisons in the prior decade. The median variance tolerance for food and labor costs has declined from the mid‐1980s to the mid‐1990s and now to the first decade of the twenty‐first century. Median variance tolerances for beverage costs are slightly higher in this study than in the mid‐1990s study.Research limitations/implicationsThe authors are unable to determine any statistical differences between current and prior studies due to a lack of prior data. Further research on tolerable control variances can be studied for other costs, such as supplies, energy, and fixed charges.Practical implicationsThis paper provides findings that can help managers as they compare their budgetary control practices with US club industry practices. Educators can provide selected cost control information to their hospitality students focusing on club management and researchers can use this information as a base for further research in cost control areas.Originality/valueThis paper is the first paper on budgetary controls in the US club industry in the twenty‐first century.

Prior research suggests that hospitality firms behave differently than other firms in terms of financing and investment issues. Such behavior may be attributable in part to agency problems and corporate governance structures in hospitality firms. This paper contains a report of an investigation into whether corporate governance mechanisms differ in hospitality firms relative to other industries. Our findings suggest that hospitality firms are more likely to experience agency problems than are nonhospitality firms. Hospitality firms have lower governance control mechanisms, better financial performance and higher-quality earnings than nonhospitality firms. An understanding of corporate governance control mechanisms helps to reduce agency problems and improves the hospitality firm's performance in the hospitality corporation.

ABSTRACT 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) is negatively related to international diversification and ownership by pressure-resistant groups (pension funds, mutual funds, and brokerage firms) is 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, and investments by brokerage firms are negatively related to internationalization.

ABSTRACT Managers' performance is evaluated on achieving budgetary objectives; therefore, managers practice tight budgetary control. A previous study (Schmidgall, 1998) showed that the tolerance of cost variances was lowered in the mid-1990s over the mid-1980s. This study will look at budgetary controls at clubs in the twenty-first century and consider how they have changed from the mid-1990s. In accounting literature, previous studies on budgetary control were conducted on the corporate level rather than property level. In the information age, autonomy provides more responsibility and accountability to a greater number of business units for value creation, so property-level or front-line managers will be empowered to make fast decisions based on current information (Hope & Fraser, 2000).

ABSTRACT Seventy-five percent of hospitality acquisitions from 1980 to 2000 were cash-financed. In other industries, this figure was 43 percent. Since the choice of cash versus stock financing can have a significant effect on a hospitality acquirer'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 acquisitions 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.

Although investments from institutions such as banks, insurance companies and pension funds in the lodging industry increased enormously in the 1990s, there has been no empirical research that has examined institutional preferences for lodging stocks. Understanding institutional investment patterns can help provide easier access to the capital markets for hoteliers who make large capital expenditures. This study identifies the characteristics preferred by institutional investors and also assesses whether the different institutions have heterogeneous preferences. Our results show that, in general, institutions prefer the stock of large lodging firms. They also prefer lodging firms with high capital expenditure-to-asset ratios and high debt ratios.

ABSTRACT Previous research (Canina, Advani, Greenman, & Palimeri, 2001) shows that dividend initiations and dividend increases result in higher stock returns. Although institutions need to hold stocks that pay high dividends paying because of the prudent-man rule, recent research (Grinstein & Michaely, 2005) contradicts this practice. Since hotel REITs and non-REIT hotel corporations belong to the same industry but have different dividend policies, it is worth examining the impact of dividend policy on institutional holdings. We find institutions tend to prefer REITs. We also find institutions prefer large firms that make capital expenditures, regardless of REIT status.

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. This article is available in Hospitality Review: http://digitalcommons.fiu.edu/hospitalityreview/vol25/iss1/8 Discussion Paper: Triangulation of Methodology to Solve the Practitioner Academic Debate Concerning the Value of Research

ABSTRACT 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.

Hospitality acquisition payment announcements provide a particularly interesting opportunity for exploring the effects of information asymmetry on informed trading activities in hospitality firms. The empirical results in this paper, derived from a market microstructure approach, support the presence of informed trading in the short term prior to a hospitality acquisition. For cash- or stock-financed acquisitions, while we detect no change in the bid–ask spread of acquiring firms prior to an acquisition announcement, the ask or bid depths narrow prior to an acquisition payment announcement. For mixed-financed acquisitions, the bid–ask spread for acquiring firms widens and the ask depth narrows prior to the acquisition payment announcement.

ABSTRACT ABSTRACT Although previous studies showed evidence of increasing institutional investors in the lodging industry (Corgel & DeRoos 1994, 2003; Leung & Lee, 2005; Ciochett et al., 2002), no empirical study has reported the determinant of institution's preference for lodging stocks. Since institutions act as agents for other investors, their investment patterns may be different from individual investors. In the case of litigation, the court accepts an institution's prudent investment based on the characteristics of assets in isolation. Thus, institutions will prefer lodging stocks with high liquidity, low book-to-market ratios, low long-term debt ratios, and high short-term debt.