Do institutional investors favor firms with greater brand equity? An empirical investigation of investments in US lodging firms

Purpose - The aim of this study is to investigate institutional investment behavior relating to lodging firms and their brand equity. Design/methodology/approach - Ordinary least squares (OLS) and two-stage least squares (2SLS) regressions are used. The dependent variable is institutional investor percentage and the independent variables are advertising expenditures, size, capital expenditures, proxy Q, debt ratio, price, share turnover and year. Findings - The study found that institutional investors' holdings are positively related to advertising expenditures. There is a significant difference in institutional holdings between lodging firms with advertising expenditures and those without. Institutions favor lodging firms that have lower debt ratios. Institutional investors prefer small firms because they typically offer superior returns. Research limitations/implications - Further research may be done to see whether individual investors favor firms with brand equity. Additional research may be conducted in other segments, such as restaurants or casinos. Practical implications - Findings may help lodging managers in raising financial capital from institutional investors; researchers in conducting future research on institutional investors; and educators in better describing institutional investors' important roles to hospitality students. Originality/value - The paper is the first to show a relationship between institutional investors and advertising expenditures in the lodging industry.