THE IMPLICATIONS OF FINANCIAL CONSTRAINTS: AN EXPLORATORY STUDY AMONG LODGING FIRMS IN U.S.A

The purpose of this exploratory study is to analyze the nature and implications of financial constraint problems in the American lodging sector. For this purpose, the lodging firms’ financial performance measures, such as EBITDA, sales, sales growth, return on assets, and profit margin are examined to compare the extent to which financing, investment, dividend, and cash holding policies diverge between financially constrained and unconstrained lodging firms. The results show that financially constrained firms are smaller in size and value, have lower cash, make less investments, pay lower dividends, generate lower revenues, some of which contradict the findings in mainstream corporate finance literature, where higher cash holdings and better performance were reported for financially constrained firms. Although these firms have negative return on assets and profit margin, they have higher financial leverage and promising growth opportunities. Managerial implications are discussed within the realm of financing, dividend, investment, and cash management policies