Corporate Governance In The Lodging Industry: Special Case Of The Service Industry

Abstract

This paper examines the corporate governance structure of publicly traded hospitality firms and determines whether the governance structure selected by these firms is consistent with minimizing monitoring and bonding costs dictated by the complexity of the business models.

There is strong evidence that complex firms had larger board of directors, more outside board members, a greater fraction of CEO pay being variable, and more frequent occurrence of CEO/Chairman duality than simple firms. The results also present evidence of a positive relationship between firms that have the appropriate governance structures and the profitability and valuation of the firm.