Abstract
The purpose of this paper is to examine agency problems in the hotel appraisal process. The results support the notion that information asymmetry and moral hazard had significant effects on appraised hotel values. The paper examines the differences between appraised hotel values and their sales prices and finds that agency problems help explain the differences. T-tests are used to show that appraised values are significantly less than sales prices during a period of significant information asymmetry surrounding the Tax Reform Act of 1986. Conversely, appraised values are significantly greater than the sales prices during the late 1980s, a period encompassing moral hazard problems for commercial lenders. Three ordinary least-squares regression models are used with time period and lender type as independent variables to explain these differences. Both variables are found to be highly significant in the full regression model.
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