Determinants of Capital Structure in Polish Hotel Companies
Authors: Gołembski Grzegorz , Bera Marta 
Published: September 2017

Purpose. The identification of factors which have decisive impact on capital structure in the Polish hotel sector. Our aim is to answer the question of whetherthe choice of decision making variables influenced by the location of facilities.

Method. We used multiple linear regression analysis to investigate capital structure determinants in hotels. The variables for our model were selected with the use of the forward selection method. In this method, the independent (explanatory) variables are chosen from a group of candidates (starting with the highest R2 variable) and added to the model successively in such a way as to obtain the highest R2 determination coefficient at each step of the selection, and stop the selection process when none of the remaining candidate variables are significant when added to the model. Each constructed econometric model was tested at a significance level of α=0.05 by performing the t-Student and F Fisher-Snedecor tests. The sample selected for our study contains 35 Polish hotels (17 located in large cities and 18 in tourist regions).

Findings. The following relations between dependent and independent variables were revealed: the debt ratio (debt versus total capital) of hotels located in tourist regions depends on firm size, and particularly on the ratio of fixed tangible assets to total assets. The equity ratio (equity versus total capital) of hotels located in tourist regions is determined by the return on assets (ROA). The question of how quickly the benefits from the investment project will return the initial capital invested has a fundamental bearing on planning further investments. None of the independent variables have a significant effect on the level of debt capital in hotels located in cities. On the other hand, similarly to hotels located in tourist region, the equity ratio in the capital structure of city hotels depends on ROA, and likewise, the information about the payback period of the capital invested in projects is important.

Research and conclusion limitations. Given that models constructed in the course of the study are characterized by a weak correlation to the existing situation, the analysis does not permit more detailed conclusions. Further studies on hotel capital structures and their determinants are needed to explore circumstances other than the location of facilities alone, such as the degree of hotel centralization or the size of hotel chains.

Practical implications. The capital structure constructed as a division into equity capital and long-term liabilities dictates the weighted average cost of capital. The target capital structure should set the relation between risk and the rate of return at a level allowing the maximization of company value. Despite this fast growth of the hotel sector in Poland, there are no studies on factors influencing capital structures in hotel companies. This means that we have little knowledge about the variables considered by managers who make decisions regarding the choice of funding sources to build up assets.

Originality. There have been no records of studies of those determinants with respect to the hotel industry. World literature contains infrequent examples of such research, however, the reported studies investigating different explaining variables and attempting to construct a statistically significant model have not been successful.

Type of paper. The article presents the results of empirical research against the background of world studies on capital structure determinants in the hotel industry.