Financing Decisions and Performance of Italian SMEs in the Hotel Industry
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Date
2018
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Abstract
This study investigates the existence of an optimal capital structure for small and medium enterprise (SME) hotels through
the analysis of the relationship between financing decisions and financial performance in a large sample of Italian hotel SMEs.
The results show that hotel SMEs face an optimal capital structure that allows them to maximize returns to investors,
while instead having both too little and too much debt reduces their financial performance. This notwithstanding, we show
that hotel SMEs are not particularly concerned with optimizing their capital structure, and their funding behavior is deeply
connected with the availability of internally available funds, a typical pecking order behavior, and they result extremely slow
in converging toward their optimal level of leverage so that they could improve their performance by adopting a more
sophisticated financial strategy.
Description
Cornell Hospitality Quarterly; 1–20
Keywords
capital structure dynamics, hotel management, SMEs, firm financing, corporate performance, panel data models