Fee-Oriented Strategies, Ownership Structure and Analyst Forecast Accuracy in the Hospitality Industry

Abstract

This study analyzed the impact of the interplay between fee-oriented strategies and ownership structure on analyst forecast accuracy using a sample of international publicly-listed hospitality firms. Based on 29,019 earnings forecasts made by financial analysts, using Ordinary Least Squares regression (OLS), entropy balancing, and Heckman two-stage models, we documented that, on average, forecasts were more accurate for firms pursuing a fee-oriented strategy. Moreover, the positive effect of fee-oriented strategies on forecast accuracy was stronger for companies with concentrated ownership. We explain our results by the fact that fee-oriented firms enjoyed more stable cash flows and revenue, reducing information asymmetries between a firm’s outsiders and insiders, thus enabling analysts to make more accurate forecasts. This effect was more important for firms with concentrated ownership in particular, as they generally disclosed less information to the capital markets. Our findings should be of great interest to hospitality firms’ owners, managers, and boards of directors.