Financial leverage phenomenon in hospitality industry sub-sector portfolios

Abstract

Purpose

This paper aims to seek answers to a primary question: “How much do divergent leverage factors account for fluctuations in time-varying financial leverage in leading hospitality sub-sectors decomposed by four exclusive sub-portfolios?” In the path of seeking answers, this paper investigated the effects of both firm-specific and macroeconomic indicators to firms’ varying financial leverage in those primary sub-sectors overtime.

Design/methodology/approach

In each sub-sector portfolios, firms were sorted based on market-to-book values (Mktbk _it ) with median breakpoint percentiles. For hypothesis testing, this paper constructed panel regression models with firm fixed-effects to layout fluctuant financial leverage phenomenon engaged with a set of 11 leverage factors in each Mktbk _it sorted sub-sector portfolios.

Findings

Results exhibited assorted evidences. The bottom line was: firms with different market capitalization rates in each portfolio acted differently in regard to the magnitude of financial leverage across time.

Research limitations/implications

The final sample of 415 firms in four sub-sector portfolios sufficiently embraced financial leverage composition in the hospitality industry across time. However, by reason of lack of data in the other intra-hospitality industries, such as gaming and/or cruise lines, findings did not represent the firms operated in those sub-industries.

Originality/value

This paper departed from the established context of the previous literature in the manner that it expects to add to the literature by demonstrating the core drivers causing the deviations in financial structure in four exclusive, hospitality industry sub-sector portfolios with varying leverage proxies overtime.

Citation

Kizildag, M. (2015), "Financial leverage phenomenon in hospitality industry sub-sector portfolios", International Journal of Contemporary Hospitality Management, Vol. 27 No. 8, pp. 1949-1978. https://doi.org/10.1108/IJCHM-07-2014-0347