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Abstract: This paper studies the financial determinants of debt of Portuguese hotel companies using the main indicators suggested by the Trade-Off and the Pecking Order theories. The main objective of this study was to analyse the determinants that most contribute to the debt of Portuguese companies in the hotel industry. The study also aimed to understand the impact of crisis periods on the debt. Since data collected refers to the period between 2005 and 2020 it also analyses the impact of the 2008 financial crisis and, more recently, the global pandemic COVID-19. The results show that debt is negatively associated with profitability and age, and is positively associated with size, growth opportunities and tangibility. These results are in line with the Pecking Order theory, ranking the choice of financing methods. We can also conclude that the way hotels finance their assets will affect their level of debt. We also evidence that debt of Portuguese hotels companies increases in periods of crisis.
Keywords: debt, hotels companies, crisis, capital structure
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1. Introduction
The hospitality industry is one of the main contributors to economic development, wealth and job creation in Portugal, and its importance has increased over the years. In this study, companies in the hospitality sector are analysed due to the fact that it is an industry that has suffered greatly from the current pandemic of COVID-19, because they were forced to stop working, consequently going through a period of no revenues and the workers layoff. Therefore, it is expected that debt increased, either by new borrowings to finance older responsibilities, or by having adhered to moratorium programs of previous financing. The aim is to understand what factors have affected the debt of Portuguese companies in this industry. Thus, the main objective of this study is to understand which factors affect the debt of Portuguese firms in the hotel industry between 2005 and 2020.
This study has a relevant contribution to the literature. It investigates the debt of Portuguese companies in the hotel industry over a long period of time, which allows the inclusion of the analysis of financial crisis and the COVID-19 pandemic periods. Thus, it adds information to the literature of the hotel industry, distinguished by the possibility of...