Evaluation of hotel industry performance and corporate governance: A stochastic frontier analysis

• This study aims to measure the overall performance of 63 hotel units.
• We explain it in terms of the corporate governance mechanisms implemented.
• We used a stochastic frontier model to assess the degree of efficiency of each lodging facility.
• We assumed that the inefficiency generated is constant over time for all firms.

The aim of this paper is to investigate the impact of corporate governance on Tunisian hotels' performance. This study introduces different variables associated to corporate governance in the hotel industry to measure the association between corporate governance and Tunisian hotels' performance. Thus, this paper evaluates the efficiency of 63 hotels during 2011–2012 and adopts a stochastic frontier function with 16 inputs (size of board of directors, number of outside directors, institutional participation in the capital, board independence, stock ownership of board members, CEO — chair separation…). Six outputs as performance measures (financial performance, social and human performance, organizational performance, commercial performance and global performance) are specified and used to estimate hotel efficiency. The results reveal that corporate governance measures are positively and significantly associated with hotel performance, and that hotels in Tunisia are on average operating at 65.02% efficiency.