Hotel Managerial Ownership and Firm Performance: An Empirical Investigation

Abstract

Abstract

Agency theory suggests that increasing managerial ownership, or the proportion of stocks owned by corporate managers, can better align owner/manager interests and motivate managers for better performance. This study empirically examines the impact of managerial ownership on firm performance in the hotel industry. Using the 1996 financial data of 45 US hotel companies, the study found that managerial holdings had a positive impact on profit margin, operating return and return to owners' equity. The positive impact was more significant in the fast-growing regular hotel sector than in the slow-growing casino hotel sector. The findings show that increasing managerial ownership can be a viable means for improving accounting profitability in the hotel industry.