Microsoft Word 2007 ichrie conference Proceedings Final-Final 06-06-07. doc

 
2007 Annual International CHRIE Conference & Exposition 
134
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2007 Annual International CHRIE Conference & Exposition 
135
INTERNATIONALIZATION, CAPITAL STRUCTURE, AND FIRM PERFORMANCE: THE CASE OF 
HOTEL COMPANIES 
 
SooCheong (Shawn) Jang 
Purdue University 
and 
Chun-Hung (Hugo) Tang 
Purdue University 
 
ABSTRACT 
This study examined internationalization and financial leverage in a simultaneous equations model to 
understand how they affected profitability after accounting for the endogeneity between strategic and financial 
decisions. An analysis of hotel companies showed an inverted U shaped relationship between financial leverage and 
profitability, implying an optimal leverage pattern for maximum profitability. The study also found that 
internationalization significantly, but only indirectly, influences the profitability of hotel firms through the 
moderating role of leverage. This indicates that controlling financial leverage is a more direct strategy than 
internationalization for improving profitability. However, the result also suggests that strategic perspective should be