Determinants of Capital Structure in the Hospitality Industry: Impact of Sector-Specific Performance Determinants on Capital Structure

2023/05/15 by Mundi, Hardeep Singh, Gautam, Jayant, Vasisht, Shailja

paper · doi:10.7275/z6gp-an42

Abstract

This study uses GMM and a sample of 42 hospitality firms in India for the period 2014 to 2021 to examine the sector-specific performance determinants of capital structure for Indian hospitality firms. The sector-specific variables studied include average daily room rent (ADRR), occupancy rate (OR), and revenue per room (RevPAR). Three proxies for capital structure are used: total debt ratio, long-term debt ratio, and short-term debt ratio. Results indicate that ARDD, OR, and RevPAR are significant determinants of the total, long-term, and short-term debt ratios at least in the context of Indian hospitality firms. Results also suggest that industry-specific variables should also be consid- ered to understand the capital structure decisions of the hospitality sector.

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