The impact of smoking bans on the hospitality industry: New evidence from stock market returns

Abstract

The majority of over 150 studies conclude that smoking bans do not have adverse effects on the revenues, profits, or employment of hospitality industry firms. However, several important criticisms have recently been raised which call into question many of the prior results. I examine the market value impact of a proposed smoking ban using a sample and methodology not subject to the perceived shortcomings in prior studies - an event study on the Indian hospitality industry. Contrary to the results in most prior studies, I find negative abnormal stock returns to portfolios of the hospitality industry firms examined upon the announcement of a proposed smoking ban. These results support the conclusion that a smoking ban lowered the aggregate market value of these firms. © 2009 The Berkeley Electronic Press.