Business & Management

Business & Management

Journal of Hotel & Business Management

Author(s): Dr Michael J TURNER, Chris GUILDING

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Purpose – The purpose of this paper is to empirically investigate the differential motivations of hotel owners and operators to engage in earnings management through the selective capitalisation or expensing of asset related expenditures. Design/methodology/approach – Research evidence has been collected via a mixed methods approach utilising 20 semi‐structured interviews with key hotel management contract stakeholders in Australia and a questionnaire survey administered to hotel general managers in Australia and New Zealand. Findings – A review of the literature has resulted in an original distillation of 18 distinct earnings management motivations for hotel owners and operators. Qualitative data collected suggest an additional four motivations and that the primary motivation for hotel owners and operators to engage in earnings management stems from the two parties' desire to affect the size of the incentive management fee that is paid to hotel operators. A suggestion that operators have a greater tendency to seek to capitalise asset related expenditures, relative to owners, has been supported by both qualitative and quantitative data collected. Originality/value – This study appears to be the first to have examined the manner in which an idiosyncratic aspect of hotel governance can result in competing earnings management motivations between hotel owners and operators; the first to pursue a broad level of abstraction with respect to examining earnings management in the context of asset related expenditure capitalisation decision making; the first to assess the relative strength of earnings management motivations concerning the capitalisation or expensing of asset related expenditure; and the first to conduct earnings management research utilising a mixed methods research approach involving the conducting of face‐to‐face interviews as well as administration of a questionnaire survey.

This article was published in Qualitative Research in Accounting & Management and referenced in Journal of Hotel & Business Management

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