Business strategies and financial reporting complexity in hospitality firms

Cédric Poretti, Tiphaine Jérôme () and Cindy Yoonjoung Heo
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Tiphaine Jérôme: CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes

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Abstract: This study investigates the impact of the asset-light and fee-oriented (ALFO) strategy on the auditors' assessment of financial reporting complexity. To do so, we adopt an integrated mixed method design. First, from semi-structured interviews with audit experts active in the hospitality industry, we identify the proposition that the ALFO strategy induces incremental financial reporting complexity leading external auditors to set higher audit fees. Then, the association between the extent of asset-lightness and audit fees is empirically tested on a sample of global hospitality companies over the 2010–2019 period. The results confirm an inverted U-shaped association. Study findings are of interest to hospitality firms' investors, board members, and executives as they provide fresh insight into an under-investigated consequence of the ALFO strategy and reveal the conditions preserving accounting information quality in an increasingly complex environment.

Date: 2023-04
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Published in International Journal of Hospitality Management, 2023, 110, pp.103429. ⟨10.1016/j.ijhm.2023.103429⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04478581

DOI: 10.1016/j.ijhm.2023.103429

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