Factors Affecting the Long-Term Debt Decision of Restaurant Firms

The purpose of this article is to evaluate the impact of previously theorized factors on the long-term debt ratio of publicly traded restaurant firms. The authors examined the financial literature to find variables related to three capital structure theories: contracting costs of debt, signaling eff...

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Bibliographic Details
Published inJournal of hospitality & tourism research (Washington, D.C.) Vol. 26; no. 4; pp. 422 - 432
Main Authors Dalbor, Michael C., Upneja, Arun
Format Journal Article
LanguageEnglish
Published Thousand Oaks, CA Sage Publications 01.11.2002
SAGE PUBLICATIONS, INC
Subjects
Bond issues
Long term debt
Restaurants
restaurant financing
capital structure
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Summary:The purpose of this article is to evaluate the impact of previously theorized factors on the long-term debt ratio of publicly traded restaurant firms. The authors examined the financial literature to find variables related to three capital structure theories: contracting costs of debt, signaling effects, and tax effects. Using a cross-sectional pooled regression model on publicly traded restaurant firms, the authors’ results largely confirm those of Barclay and Smith that were based on a wide range of industrial firms. Firm size and the probability of bankruptcy are positively correlated with higher long-term debt ratios. Firms with growth opportunities use less long-term debt. However, no significant relationship was found between the use of long-term debt and effective tax rates.
ISSN:1096-3480
1557-7554
DOI:10.1177/109634802237487