The effect of firm size on firm performance in the US lodging industry : the moderating role of board diversity

The main purpose of this study is to investigate the relationship between firm size and firm performance in the US lodging industry. And, to more comprehensively investigate the effect of firm size on firm performance, this study employs the degree of board diversity, one of the critical governance issues highly associated with the effectiveness of the board, as a moderator. For measuring the degree of board diversity, the current study divides board diversity into two types (i.e., functional diversity and gender diversity), The sample period spans 1993-2018 to comprehensively include all publicly traded firms filing their 10-Ks and DEF14A in the Electronic Data Gathering, Analysis, and Retrieval system (EDGAR), After removing firms with missing values, the study obtained 224 firm-year observations for firm size and board diversity. For estimations methods, according to results of the Hausman test, this study employs the random effects estimation for examining the effect of firm size and the moderating effect of board functional diversity and board gender diversity on the relationship between firm size and firm performance. Based on this study, the economies of scale were found in the US lodging industry since the firm size shows a positive and significant effect on firm performance. Meanwhile, the results of the study confirm that the effect of firm size on firm performance shows inconsistent empirical results depending on the industry and contextual factor. Specifically, regarding the moderating effect of board diversity on the relationship between firm size and firm performance, the degree of functional diversity significantly magnifies the effect of firm size on firm performance, but gender diversity insignificantly moderates the effect of firm size on firm performance. The current study attempts to contribute to the hospitality literature by examining the topic that has been rarely dealt with in the hospitality field. And, this study contributes to the hospitality literature by offering a unique dimension that the effect of firm size on firm performance in the US lodging industry could differ, contingent on the degree of board diversity. At the same time, the results of this study serve as practical guidelines for the lodging firms’ strategic management and board composition.