Start Date

8-1-2011 8:00 AM

End Date

8-1-2011 9:15 AM

Track

1. Track 1 – Formal Paper Presentation

Subject Area

Finance and Economics

Faculty Member

SooCheong (Shawn) Jang jang12@purdue.edu

Abstract

Financial literature of cash or liquidity management has recently focused on the role of financial constraints on firms’ liquidity decision. Even though the accessibility to capital market is considered as one of major topics in hotel firms’ financial management considering high usage of debt financing, litter effort has been made. Considering the extent of hotel firms’ financial constraints, this study examines the precautionary motive of cash holding toward external financing (debt) and internal financing (cash flow). Using two financial constraint measurements, bond rating and dividend payment, the study tests the relation of cash to debt and cash flow. Regardless of the extent of financial constraints, cash holding is negatively related to debt, which is partially different from the expectation, indicating the accessibility to capital market of hotel firms. Practical implication for manager and future researches are discussed.

Keywords

Cash holding, Financial constraints, Debt, Cash flow, Hotel firms

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Jan 8th, 8:00 AM Jan 8th, 9:15 AM

Cash Holdings of Hotel Firms: The Financial Constraints Perspective

Financial literature of cash or liquidity management has recently focused on the role of financial constraints on firms’ liquidity decision. Even though the accessibility to capital market is considered as one of major topics in hotel firms’ financial management considering high usage of debt financing, litter effort has been made. Considering the extent of hotel firms’ financial constraints, this study examines the precautionary motive of cash holding toward external financing (debt) and internal financing (cash flow). Using two financial constraint measurements, bond rating and dividend payment, the study tests the relation of cash to debt and cash flow. Regardless of the extent of financial constraints, cash holding is negatively related to debt, which is partially different from the expectation, indicating the accessibility to capital market of hotel firms. Practical implication for manager and future researches are discussed.