Effects of Business and Finance Conditions on Tourism Firms’ Financial Performances: Evidence From Major Tourist Destinations

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.