Do corporate governance practices affect the financial performance of international hotel chains in Egypt? The threshold regression model

Document Type : Original Article

Authors

1 Faculty of Tourism and Hotels, University of Sadat City, Egypt

2 Faculty of Economic Sciences and Management, University of Tunis El Manar, Tunis.

Abstract

This study enriches the literature on hotel governance by adopting an advanced panel threshold regression model to empirically examine the relationship between corporate governance practices and the financial performance of international hotel chains in Egypt. To this end, the current study designed a corporate governance index (CGI) which consists of four attributes (i.e., the composition of the board of directors, board independence, shareholders’ rights, and disclosure of information). The measures of financial performance were the return on assets and book value per share. Similarly, the effects of some control variables such as firm age and size have also been examined. Data was collected through a questionnaire survey dealt with a panel of 45 representatives of the key international hotel chains in Egypt. The findings proved that the relationship between the governance practices and the financial performance of the investigated hotel chains is marked by the presence of a threshold effect. Below this threshold, the CGI hasn't a significant impact on the financial performance. However, above this threshold, it significantly improves the financial performance of the Egyptian hotels.

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