Credit Availability and Capital Structures: Does Size Matter? An Analysis of the U.S. Lodging Industry

Abstract

Capital structure composition decisions are considered as very crucial for the overall success of firms. Lodging industry warrants an even greater emphasis on these decisions for the nature of this industry. This study empirically investigates the effect of credit availability on the leverage of large and small lodging firms in the United States using multivariate analysis of variance (MANOVA). This study uses the Case-Schiller home price index to identify the three time points of differing credit availability to businesses in the United States. Leverage, net leverage, and short-to-long-term debt ratios of large and small U.S. lodging firms were analyzed at these differing credit availability time points to assess any significant differences. Significant effects of credit availability were found on the leverage and net leverage of both large and small lodging firms, but no significant effect was found on the short-to-long-term debt ratio of U.S. lodging firms. Interestingly, the leverage levels were found to be highest at the average availability of credit than when compared to the high and low availability of credit.