Performance implications of capital structure: evidence from quoted UK organisations with hotel interests

Phillips, Paul A. and Sipahioglu, Mehmet A. (2004) Performance implications of capital structure: evidence from quoted UK organisations with hotel interests. Service Industries Journal, 24 (5). pp. 31-51. ISSN 0264-2069. (The full text of this publication is not available from this repository)

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Official URL
http://dx.doi.org/10.1080/0264206042000276829

Abstract

The objective of this article is to foster research on the relationship between capital structure and corporate performance with hotel companies. Using data collected from 43 UK quoted organisations which possess an interest in owning and managing hotels, Modigliani and Miller's (1958) capital structure irrelevancy theorem is tested. Empirical analysis revealed no significant relationship between the level of debt found in the capital structure and financial performance. These results are consistent with Modigliani and Miller's theorem. Results also highlight that low levels of returns on equity are a feature of the sample. This latter point appears to an important issue for hotel investment, as hotel companies are continually looking to raise external finance to fund expansion. The findings of the study suggest that Chief Financial Officers of the sample organisations need to identify novel ways of expanding the business without increasing the levels of debt. The article concludes by providing examples of how some Chief Financial Officers are responding to the challenges of capital structure.

Item Type: Article
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: Faculties > Social Sciences > Kent Business School > International Business and Strategy
Depositing User: Paul Phillips
Date Deposited: 06 Oct 2008 10:42
Last Modified: 06 May 2014 10:58
Resource URI: http://kar.kent.ac.uk/id/eprint/10318 (The current URI for this page, for reference purposes)
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