Tourism

Social and Governance Performance Affects Institutional Ownership in Hospitality and Tourism

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Bayes Business School (formerly Cass) research suggests hospitality and tourism companies can raise lucrative institutional capital by improving their social and corporate governance performance.

The study, co-authored with Dr. Daniel Lisimachu, Associate Professor of Accounting, and Dr. Pavel Bilinsky, Associate Professor of Accounting at Bayes, examined four specific aspects of corporate social responsibility (CSR) – social, environmental, corporate governance, product and quality of service – and the impact they have had on the level of institutional investment in the hospitality and tourism sector.

The main findings of the study include:

  • Companies with high social scores have a high level of institutional ownership due to strong employee relationships, workplace diversity, and a sense of community.
  • Similarly, strong corporate governance indicators such as governance arrangements, board structure, board independence, and business ethics attract large institutional investment.
  • The social and governance aspects of CSR attract investors who are more committed to sustainable and long-term value creation, domestic investors who are less likely to withdraw funding, and block holders who tend to interact with management. Thus, higher levels of social awareness and corporate governance attract more funds from dedicated investors.
  • However, concern for the environment had little effect and did not lead to an increase in the institutional assets of companies in the hospitality and tourism sector.

In a largely capital-intensive environment with high overhead costs, the hospitality and tourism sector requires outside capital to successfully grow companies. Institutional investments by organizations such as mutual funds, pension funds, and insurance companies provide vital resources to support the growth of travel companies, hotels, and restaurants, but firms increasingly need to demonstrate social awareness to stakeholders in order to attract these investments.

Dr. Bilinski said that the study showed the importance of breaking down CSR goals into different components.

“A lot of research has focused on the benefits of corporate social responsibility as a single set of actions, without considering how individual aspects of it elicit different responses from different stakeholders in different industries,” said Dr. Bilinsky.

“Rather than trying to excel at everything to improve their image, companies seeking funding need to understand the aspects of CSR, study what their investors care about, and focus on that.”

Dr. Bilinski says that in the case of the hotel and tourism sector, the study shows where…

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