Impact of Debt on Profitability of Hotel Companies Listed in Stock Exchange of Thailand

Abstract

The study aims to examine the situation regarding profitability and debt financing as well as to investigate the impact of debt on profitability of nine hotel companies listed in the Stock Exchange of Thailand during 2001 – 2020 by employing descriptive statistic including mean values and trend lines and multiple linear regression analysis with dummy variables. In this study, total debt, short-term debt and long-term debt are measured by total liabilities to total assets ratio, current liabilities to total assets ratio, and non-current liabilities to total assets ratio, respectively while net profit margin represents profitability .Moreover, cost of debt, liquidity, efficiency, sale growth, and company size are assigned as controlling variables. The findings reveal that profitability of all hotel companies was volatile during the study period and Shangri-La Hotel had the greatest profitability with the average net profit margin of 12.34 percent. Furthermore, all of them had debt financing which was obtained from both short-term and long-term debt. The results from the multiple regression analysis reveal that total debt, short-term debt and long-term debt had the significantly negative impact on profitability of hotel companies but short-term debt had the greater impact on profitability than long-term debt. Furthermore, efficiency as measured by total asset turnover was found to have the positive impact on profitability.