Article ID Journal Published Year Pages File Type
1009785 International Journal of Hospitality Management 2012 6 Pages PDF
Abstract

This study investigates whether corporate investment by REIT hotel companies (hotel REITs hereafter) is more constrained than investment by C-corporation hotel companies (hotel C-corps hereafter). The investments of hotel REITs and hotel C-corps are examined by comparing the sensitivities of investment to cash flow and investment opportunities between the two groups. Results show that the sensitivity of investment to cash flow is positive and significantly higher for hotel REITs than for hotel C-corps, suggesting that hotel REITs are likely to experience more constraints on their corporate investment. This finding suggests that hotel firms and owners should be more cautious about electing to be a REIT if they are planning large investments in the future. In addition, this finding has policy implications; even a small reduction in the rate of mandatory dividend payouts could significantly increase hotel REITs’ corporate investments.

► This study investigates whether corporate investment by REIT hotel companies is more constrained than investment by C-corporation hotel companies. ► The result shows that the sensitivity of investment to cash flow is positive and significantly higher for hotel REITs than for hotel C-corps, indicating that hotel REITs are likely to experience more constraints on their corporate investment. ► This finding suggests that hotel firms and owners should be more cautious about electing to be a REIT if they are planning large investments in the future.

Related Topics
Social Sciences and Humanities Business, Management and Accounting Strategy and Management
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