Determinants of Capital Structure in the Hospitality Industry: Empirical Evidence

This paper studies the determinants of hotel SMEs' capital structure using the theoretical framework, and the leading indicators suggested by the Trade-off and Peeking Order theories. We collected financial information from the Bureau Van Dijk database, observing a ten-year time horizon (2010 to 2019 included). The companies were selected based on the indication in paragraph 3, and all fell into the category of SMEs according to the European Commission criteria. Based on the accounting information, we calculated the dependent variables (Total Debt, Long-Term Debt, and Short-Term Debt) and the independent variables (Profitability, Tangibility of Assets, Growth, Size, and Age). For our analysis, we first used a panel data methodology, developing the least squares regressions (POLS) and the fixed effects models (FEM) and then, based on the results, we chose the fixed effects model (FEM) as it was more significant. Subsequently, we tested the hypotheses of the two theories (Trade-Off and Pecking Order) with our analysis model. The results highlighted that profitability, asset tangibility and size are the most significant variables in explaining the behaviour of hotel SMEs.