Financial Disclosure in the Travel and Leisure Industry ANDREAS ANDRIKOPOULOS 1 *, ANNA A. MERIKA 2 and ANDREAS G. MERIKAS 3 1 Department of Business Administration, University of the Aegean, 8 Mihalon Street, 82131 Chios, Greece 2 Department of Economics, Deree College, 33-35 Marathonos Street, Voula 16673, Greece 3 Department of Maritime Studies, University of Piraeus, 33-35 Marathonos Street, Voula 16673, Greece ABSTRACT This study explores the determinants of Internet financial disclosure in the travel and leisure industry. Studying the case of the firms that are listed in the London Stock Exchange, we employ the generalized method of moments in order to investigate the cross-sectional variation in the quantity of financial information, which is disclosed on corporate websites of travel and leisure firms. We find that disclosure is posi- tively associated with corporate size, financial leverage, concentrated ownership, dual listing and profitability. We also discover that prof- itability is not only a determinant of financial disclosure in the travel and leisure industry but also its consequence: More profitable firms yield more requests for transparency among their stakeholders, and they also have the necessary resources to respond to these requests. Copyright © 2016 John Wiley & Sons, Ltd. Received 25 November 2015; Accepted 19 March 2016 key words internet disclosure; profitability; travel and leisure industry INTRODUCTION Voluntary and mandatory disclosure of financial information is a costly but effective mechanism of resolving information asymmetries thus reducing the perceived uncertainty of investors and stakeholders. Major corporate scandals such as the cases of Enron, WorldCom and Parmalat have been identified as problems of disclosure (Chandra, Ettredge & Stone, 2006); increased transparency and disclosure was one of the managerial and regulatory responses to corporate scandals (e.g. Ball, 2009). Moreover, the global financial crisis of 2007, being a crisis of corporate governance, raised again the question of the conflict between managers and owners and, as is often the case in agency conflicts, the ques- tion of increased transparency through financial disclosures. Transparency was expected to strengthen the mechanism for resolving information asymmetries and the ensuing agency problems (e.g. Bischof & Daske, 2013). Especially in the tourism industry, corporate governance and principal- agent relations lie at the heart of essential challenges such as the efficient management of tourism organizations, the successful governance of tourism destinations, and the financial performance of tourism enterprises (Garnes & Grønhaug, 2011; Beritelli, Bieger & Laesser, 2007; Meh, 2013; Al-Najjar, 2014); in August 2014, Labirint, one of the biggest travel companies in Russia suddenly announced bankruptcy. Labirint’s bankruptcy was preceded by the financial problems of Ideal Tour, its mother company; it also preceded the bankruptcy of smaller travel agencies like Roza Vetrov Mir, Neva and Expo-Tour. Tens of thousands of tour- ists were affected by these consecutive bankruptcies, and tourism destinations suffered substantial costs. Transparent financial management in tourism industry is essential to both companies and their stakeholders, and disclosure practices are essential in this respect. As corporate websites are the principal pillar of a firm’s communication with its nexus of stakeholders, financial disclosure on the internet is a catalyst for agency relations and information asymmetries, especially because websites (unlike hard copy financial reports) are dynamic and, there- fore, potentially reflective of the interests and needs of both the reporting entity and its stakeholders. Furthermore, recent evidence has highlighted the ability of Web disclosure to account for the cross-sectional variation in corporate profit- ability, partly because increased transparency reduces uncertainty and, therefore, brings down the cost of capital (Andrikopoulos, Merika, Triantafyllou & Merikas, 2009). Given the importance of financial disclosure on the Inter- net, we try to explore whether financial information is disclosed on corporate websites and also whether such disclosure is associated with financial performance. So far, the literature on the cross-sectional variations of Web reporting has spanned a wide range of corporate governance discussions, trying to explore variables associated with Inter- net financial disclosure in various industries and countries. Most studies use not only financial variables like profitabil- ity, market capitalization and financial leverage but also ownership concentration and corporate governance as explanatory factors of the quantity and quality of financial reporting on the Internet (e.g. Ettredge, Richardson & Scholz, 2001; Debreceny, Gray & Rahman, 2002; Xiao, Yang & Chow, 2004; Andrikopoulos, Merika, Triantafyllou & Merikas, 2009). However, disclosure is not only the result of corporate fundamentals but is also one of their determi- nants; Andrikopoulos, Merika, Triantafyllou and Merikas (2009) discovered a positive and bidirectional link between financial performance and Internet financial disclosure in the case of the shipping industry. In this paper, we explore *Correspondence to: Andreas Andrikopoulos, Department of Business Administration, University of the Aegean, 8 Mihalon Street, 82131 Chios, Greece. E-mail: apa@aegean.gr Copyright © 2016 John Wiley & Sons, Ltd. International Journal of Tourism Research, Int. J. Tourism Res., 18: 612–619 (2016) Published online 12 May 2016 in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/jtr.2078