Article2008

Examination of Various Financial Risk Measures for Lodging Firms

15 citations0/0 files storedJournal of Hospitality & Tourism Research

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Financial Analysis and Corporate Governance Corporate Finance and Governance Financial Distress and Bankruptcy Prediction

Abstract

Financial researchers, including those concentrating on the lodging industry, use various financial risk measures for their studies. Examples of those risk measures are beta, earnings variability, bankruptcy probability, debt-to-equity ratio and book-to-market ratio. The purpose of this study is, first, to descriptively investigate various financial risk measures used in the lodging financial literature by performing factor analysis and identifying four distinct risk groups. Second, this study examines the predictive ability of the four risk groups for lodging firm performance. The findings of this study suggest that strategic and stock performance risk factors better represent a lodging firm's financial risk than do bankruptcy and firm performance risk factors, and also, ROA than ROE better estimates lodging firm performance in terms of their relationships with financial risk factors.

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References

1979Prospect Theory: An Analysis of Decision under Risk 1988Prospect theory: An analysis of decision under risk 1964CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*1992The Cross-Section of Expected Stock Returns 1965The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets 1975THE VALUATION OF RISK ASSETS AND THE SELECTION OF RISKY INVESTMENTS IN STOCK PORTFOLIOS AND CAPITAL BUDGETS**This paper is another in a series of interrelated theoretical and statistical studies of corporate financial and investment policies being made under grants from the Rockefeller Foundation, and more recently the Ford Foundation, to the Harvard Business School. The generous support for this work is most gratefully acknowledged. The author is also much indebted to his colleagues Professors Bishop, Christenson, Kahr, Raiffa, and (especially) Schlaifer, for extensive discussion and commentary on an earlier draft of this paper; but responsibility for any errors or imperfections remains strictly his own.[Professor Sharpe's paper, “Capital Asset Prices: A Theory of Market Equilibrium Under Conditions of Risk” (Journal of Finance, September 1964) appeared after this paper was in final form and on its way to the printers. My first section, which parallels the first half of his paper (with corresponding conclusions), sets the algebraic framework for sections II, III and VI, (which have no counterpart in his paper) and for section IV on the equilibrium prices of risk assets, concerning which our results differ significantly for reasons which will be explored elsewhere. Sharpe does not take up the capital budgeting problem developed in section V below.]1980Financial Ratios and the Probabilistic Prediction of Bankruptcy 1972

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