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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.
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