EARNINGS TARGETS IN SPANISH HOTEL INDUSTRY: AN APPROXIMATION

In this paper, two earnings targets -avoiding losses and earnings decreases- are analyzed in Spanish hotel industry. The methodology used as a proxy to earnings targets is frequency histograms. Particularly, the existence of a “kink” in the distribution of reported earnings around zero is examined. The access to financial resources to start or to consolidate expansion policies is an important issue to the companies belonging to our sample. This specific scenario allows us to study how to reach earnings benchmarks under debt covenant hypothesis. Likewise, Spanish tourism sector is characterised by small firms and most of them are governed by families. We explore the relationship between earnings benchmarks and this particular ownership structure. Finally, we examine the presence of auditors (and Big4 auditors) as an earnings quality tool.