Debt maturity structure of private lodging firms

Abstract

ABSTRACT This study tests the signalling and liquidity risk hypotheses about the choice of debt maturity structure in the context of private lodging firms. We find a positive and significant relationship between the Z-score (as a proxy for firm quality) and the proportion of short-term debt. This finding supports the signalling hypothesis that low-quality firms prefer to issue long-term debt, while high-quality firms issue short-term debt. However, we find no evidence consistent with the liquidity risk hypothesis. We further find that the most influential factor affecting debt maturity is firm size, followed by Z-scores and then firm age. Our findings are robust to alternative estimation specifications and endogeneity concerns. Overall, our study contributes to expanding our understanding of the debt maturity structure in private firms.