Linking Earnings, Dividends and Operating Cash Flow to Stock Price in the Hospitality Industry

• In Event: Financial Accounting and Reporting V

Abstract

This study examines valuation in the hospitality industry. Different variables have been used in stock valuation in general literature with cross-industry firms. Earnings and cash flows are the two most studied variables in the literature. Previous research has shown contradictory results on which variable is the most effective in stock valuation. One variable that may explain these contradictory results is that different rankings may exist in different industries. However, there are very few studies which focus on the valuation issue in the hospitality industry. This study aims to fill the gap in the hospitality literature by comparing the effectiveness of earnings, dividends and operating cash flows on stock valuation of restaurants and hotel firms. Operating cash flow is found to be the most effective valuation indicator of hospitality stocks, followed by earnings and dividends.

Authors

• Ruixue Du, University of Wisconsin Stevens Point

• Manisha Singal, Virginia Tech

• John A Brozovsky, Virginia Tech University