An analysis of the debt‐equity structure of leading hotel chains in India

Abstract

Purpose

The article seeks to evaluate the capital structure of leading hotel chains of India to examine the role of financing decision in the overall performance of companies. It aims to analyze the debt‐equity structure of these hotels, try to discover the industry benchmark and scrutinize how capital structure plays a momentous role in the company's overall growth.

Design/methodology/approach

The paper is based on financial data collected on leading hotel chains in India. The consolidated financial results of the hotels have been considered for selecting these hotel companies.

Findings

From the financial perspective, capital structure is one of the most important determinants of a company's sustainable growth. Leverage seems to be working only for a few companies, whilst affecting others negatively. Firms that have been moderately geared have been able to generate a good return on equity.

Practical implications

The paper would be of specific use for top and middle level management of the selected hotel chains to reassess their capital structure for enhanced financial performance. For the hospitality industry in general, it would divulge best financial practices in terms of debt‐equity mix and would assist in fixing on better financing decisions.

Originality/value

The findings of the research are pertinent for the industry, as no explicit study in this area has been conducted in the Indian context. More so, because it focuses on the high turnover segment of the industry which captures the major market share in the business, it would beg the question – “Does being big always mean being better?”

Citation

Madan, K. (2007), "An analysis of the debt‐equity structure of leading hotel chains in India", International Journal of Contemporary Hospitality Management, Vol. 19 No. 5, pp. 397-414. https://doi.org/10.1108/09596110710757561