Ownership structure and firm investment: An examination of hotel firms
Abstract
Firm investment and the ownership structure are fundamentally important in corporate management in which both the firm investment and the ownership structure is an potential indicator of firm's financial health, strategy, future direction, and even interdependent relationship within themselves. However previous researches have shown limited effort to link and investigate the relationship between ownership structure and firm investment. Thus, the current study is initiated to link the ownership structure and firm investment and to investigate the relationship between firm ownership structure and firm investment based on the agency theory and hypotheses regarding ownership characteristics and behaviors using hotel firms. As potential endogenous relationship between ownership structure and firm investment is suspected, two stage lest square regression is performed for the analysis. The study reports that institutional ownership is positively related to the firm investment in the hotel industry, confirm that institutional owners are becoming more involved with the corporate firm operation and decision making in the hotel industry. Insider ownership is found out to have U-shaped relationship with the firm investment in the hotel industry with local minima of 41.30%. The results provide several academic contributions for the firm investment research by demonstrating that the firm governance structure is significantly related to firm investment. Furthermore, the study reveals endogenous relationship between ownership structure and firm investment, thereby justifying the use of in studying the relationship between ownership structure and firm investment. In the addition, induced results provide important messages regarding managerial direction for hotel firms. It is particularly meaningful to understand the relationship between ownership structure and firm investment since certain phenomena in the corporate structure (i.e. ownership structure) proxies the future changes in corporate management (i.e. dividend payout, firm investment, etc.) due to interdependency among corporate constituents. Therefore, results may be used to locate the present phenomena and countermeasure future changes in corporate management. More detailed findings and implications are provided in the conclusion section.
Degree
M.S.
Advisors
Jang, Purdue University.
Subject Area
Management|Finance
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