Abstract
This study examines the effects of business and finance conditions on the stock performances of firms operating in the tourism, hospitality, and leisure industries. This research employs panel-based first- and second-generation estimators, such as Westerlund cointegration, dynamic ordinary least squares (DOLS), and Dumitrescu–Hurlin panel Granger causality tests, to explore long-term links between business conditions, financial development, and tourism growth in major tourist destination countries selected in this study. To our knowledge, this is the first study to attempt to explore this linkage. The long-run estimation underscores that business and finance environments are significant drivers of stock price movements in this industry. Therefore, any shock in business and finance activities will have long-term effects on tourism firms’ stock prices. Moreover, the results show that the most significant factor that explains changes in the tourism stock price is foreign tourist arrivals, indicating that the tourism stock price of major tourist countries is relatively more sensitive to changes in tourist arrivals to the country than other factors. This study proposes a new research question to estimate the effects of the business, financial conditions, and tourism growth on the stock performance of the tourism, hospitality, and leisure industries. Therefore, the results are likely to become vital for policymakers, managers, and asset pricing analysts.
Highlights
Researchers have extensively studied the financial or business performance of firms
This study aims to investigate the effects of business conditions (BCs) and the financial sector on the stock performance of tourism, hospitality, and leisure firms operating in significant tourist destination countries
The results revealed that financial development (FD) plays a vital role in the tourism industry
Summary
Researchers have extensively studied the financial or business performance of firms. Stock price movements are proxies for forecasting financial performance likely to be affected by the business environment and countries’ macroeconomic trends H. Chen, 2005, 2007b, 2010; M. H. Chen et al, 2005; Hadi et al, 2019; S. H. Chen (2007b) mentioned, firms’ stock prices need to reflect their real-market values and actual financial performance, as per the efficient market’s theory. Close connections between firms’ stock movements and business conditions (BCs), and macroeconomic developments should be expected. Recent studies have shown that a positively high correlation exists between BCs and the financial performance of firms H. Chen, 2007b; Jeon et al, 2004; Shaeri & Katircioğlu, 2018)
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