Capital Structure and Profitability: Panel Data Evidence from the European Tourism Industry
Capital Structure and Profitability: Panel Data Evidence from the European Tourism Industry

Author(s): Rezart Demiraj, Suzan Dsouza, Enida Demiraj
Subject(s): Social Sciences
Published by: Udruženje ekonomista i menadžera Balkana
Keywords: Capital structure; Profitability; Tourism industry; Europe
Summary/Abstract: Finding the optimal debt-equity mix, where shareholders’ welfare and firm value are maximized is the goal of every business organization. The literature review revealed a broad spectrum of mixed and contradictory empirical findings on this topic, suggesting that the debate is far from over. This paper aims to assess the impact of capital structure on the profitability of the tourism industry in the European continent. This study is motivated by the importance that the tourism industry has for the economic development of European countries. The sample includes all European-listed firms in the tourism industry. Data is extracted from the Thomson Reuters (Refinitiv) database for a period of 10 years, i.e., 2010-2019. Panel data regression is used to determine the impact of the debt-to-assets ratio on the return on assets. The results reveal that the debt ratio has a significant negative impact on ROA, but not on ROE.

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