Tax and COVID-19 pandemic effects on the financial performance and risk of the hotel industry

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Abstract

The paper examines the hotel sector of Portugal, Spain, Italy, Greece, and Turkey from 2010 to 2021 in terms of financial performance (Arif, Noor-E-Jannat, & Anwar, 2016), based on key financial ratios risk levels as measured by the Beta coefficient and the taxation framework as defined by the difference (gap) between effective tax rate and statutory tax rate (Belesis, Karali, & Heliotis, 2021). All of the aforementioned are computed using data from Thomson Reuters Datastream (accounting variables and market prices), the KPMG website (statutory tax rates), and the World Bank Database (country-specific stock market returns). According to the findings, it is evident that the COVID-19 pandemic had a severe impact on the financial performance of the sector. Furthermore, the systematic risk of the sample firms increased during the pandemic. Regarding taxation, we detected significant differences in taxation levels, as expressed by statutory tax rates, and tax uncertainty as expressed by the gap. It appears that the hotel industry is significantly impacted by the pandemic; therefore, local governments or the European Union must assist them to prepare for this. The practical implication of this article is the portrayal of the blow to the hotel industry, and it can serve as a guide for the creation of support measures by the government.

Keywords: Corporate Taxes, Systematic Risk, Financial Performance, Hotel Industry, Mediterranean Stock Markets

Authors’ individual contribution: Conceptualization — A.G.K., N.D.B., and C.G.K.; Methodology — N.D.B. and C.G.K.; Resources — N.D.B. and C.G.K.; Formal Analysis — N.D.B. and C.G.K.; Writing — Original Draft — N.D.B. and C.G.K.; Writing — Review & Editing —A.G.K.; Supervision — A.G.K.; Project Administration — A.G.K., N.D.B., and C.G.K.; Funding Acquisition — A.G.K., N.D.B., and C.G.K.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: F30, G32, H25, M41

Received: 07.06.2022
Accepted: 07.10.2022
Published online: 10.10.2022

How to cite this paper: Koutoupis, A. G., Belesis, N. D., & Kampouris, C. G. (2022). Tax and COVID-19 pandemic effects on the financial performance and risk of the hotel industry. Corporate & Business Strategy Review, 3(2), 125–137. https://doi.org/10.22495/cbsrv3i2art11