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

 
2007 Annual International CHRIE Conference & Exposition 
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rate debt and if it desires to hedge against rising interest rates, it could enter into a floating-to-fixed rate swap to alter 
the exposure from a floating rate to a fixed rate.
Table 1:
Summary Statistics of Lodging Firms 
Variable Mean 
Median 
Std 
Dev. 
Min 
Max 
Total Assets ($million) 
2,438 
1,155 
3,162 
37 
12,668 
Net Sales ($million) 
1,166 
514 
1,781 
9.74 
10,152 
Log of Net Sales
6.13 
6.24 
1.47 
2.28 
9.23 
Book-to-Market Ratio
0.95 
0.74 
0.80 
-0.35 
3.67 
Interest 
Coverage 
ratio 
1.73 1.60 2.03 
-6.26 
10.87 
Quick Ratio
0.80 
0.65 
0.59 
0 
3.75 
Foreign Sales Ratio (%) 
0.05 
0 
0.17 
0 
0.99 
NV of Hedging Derivatives ($million) 
220 
50 
444 
0 
2,296 
NV Hedging/Total Assets (%) 
0.08 
0.04 
0.11 
0 
0.60 
NV of Interest Derivatives
208 
50 
427 
0 
2,926 
NVIR Derivatives/Total Assets (%) 
0.08 
0.03 
0.11 
0 
0.60 
Total Long-Term Debt ($million) 
1,184 
465 
1,602 
19 
5,870 
Long-Term Debt/Total Assets 
0.50 
0.49 
0.19 
0.10 
1.25 
Floating Rate Debt ($million) 
367 
125 
640 
0 
3,331 
Floating Rate Debt/Total Debt 
(%) 
0.37 0.31 0.32 0 1 
Raw 
Exposure 
Coefficient 
0.16 0.19 0.19 
-0.31 
0.48 
Absolute Exposure Coefficient 
0.21 
0.22 
0.13 
0 
0.48 
Table 1 also presents both the raw and absolute exposure coefficients from the first stage Augmented 
Capital Asset Pricing Model (ACAPM). Out of 47 firms, 38 firms had positive coefficients and 9 firms had negative 
coefficients. Of the 38 firms with positive signs, only 13 firm coefficients were significant at the 10% level. In 
contrast, none of the other nine exposure coefficients were significant at conventional levels. The results show that 
the majority (34 firms) of lodging firms have zero exposure since none of the coefficients were significant at the 
10% level. These findings imply that if firms are hedging their interest rate exposure, then firms with significant 
positive coefficients should prefer floating rate debt while firms with zero exposure would prefer fixed rate debt.
Again the preliminary findings support the largely fixed debt structure. 
Tests of mean differences between derivative users and non-users on the relevant firm characteristics are 
presented in Table 2. Firm size, as measured by the log of sales, the proportion of floating rate debt, and the foreign 
sales ratio, are significantly higher than non-derivative users. Derivative users are larger firms that face greater 
exposure from floating debt and face exchange rate exposure from their foreign operations. On the other hand, non-
users are smaller firms that are largely financed with fixed rate debt and more likely to focus on generating revenues 
from their domestic operations.