Capital Structure Determinants of Greek Hotels: The Impact of the Greek Debt Crisis

Abstract

This paper studies the firm-specific determinants of capital structure during the period of debt crisis utilizing panel data of 120 Greek hotel firms during the period of 2003–2016. A random effect panel regression analysis was performed on firm-specific determinants of capital structure before (2003–2010) and after (2011–2016) the Greek sovereign debt crisis. This study tests the efficiency of trade-off theory and pecking order theory, finding that asset tangibility is directly and positively related to total leverage and long-term leverage especially during the debt crisis period, while non-debt tax shields and tax payments are negatively and significantly impacting total leverage for both sub-periods. Finally, growth opportunities seem to have a differential impact on both total and long-term leverage between the pre- and post-crisis periods. Specifically, firms with high growth opportunities were associated with lower long-term and total leverage after the crisis suggesting a reduction of growth firms’ debt exposure during that period. This is the first study in the literature considering a vast sample of non-listed hotel firms and utilizing a sample period before the Greek sovereign debt crisis; thus, we are able to extract more efficient inferences regarding the impact of firm-specific determinants on the capital structure of hotel corporations.KeywordsHotel industryCapital structure decisionsCrisisGreeceJEL ClassificationG32M21