Microsoft Word 2007 ichrie conference Proceedings Final-Final 06-06-07. doc

RESEARCH DESIGN 
Hypothesis Development
One of the research objectives is to examine whether the gaming industry manages earnings differently 
during economic recession vs. non-recession period. During two observed economic recession period, many hotels 
had suffered financially from low occupancy rates
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. Lodging industry had also experienced negative annual changes 
in RevPAR during the year of 1990, 1991, 1992, 2001 and 2002 as shown in Table 1. The average U.S. full-service 
hotel suffered 21.3 percent decline in profits during the first six months in 2002, compared to the same period in 
2001 (Feneck, 2003). The fact is that the overall lodging industry suffering from economic recessions has placed a 
severe impact on hotel revenue generation. For the same reason, the gaming industry was likely to have generated 
less revenue during recession periods than non-recession period. In fact, Canina (2002) reported that Nevada and 
New Jersey, where most gaming facilities are located, were the states experienced one of the greatest declines in 
RevPAR as -7.17% and -6.99% in 2001 and -18.78% and -18.24% of annual percentage changes were reported, 
respectively.
During the last two observed recession periods it was expected that managers in the Gaming industry 
would attempt to manage earnings to window dress their financial statement. Furthermore, Burgsthler and Dichev 
(1997) identifies that managers emphasize the importance of increase in earnings and believe that one of objectives 
of any fiscal year is to show stable financial performance, especially in their annual reports. Hence, to assess 
whether the gaming industry treats earnings differently depending on economic condition, the authors develop the 
first null hypothesis.
Ho1: The gaming industry does not manage earnings differently during recession period. 
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During the economic recession of 1990 to 1992, many hotels had suffered financially from low occupancy rates resulting from overbuilding of 
hotel properties in the late 1980s (Andrew & Schmidgall, 1993).
Second recession observed is in the year 2001 and 2002. The annual changes in 
RevPAR had declined significantly by 7.35 in 2001 from increase of 2.61% in 2000 (Canina, 2002). 

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