Journal Article

Interactive effects of financial leverage with asset-light strategies : the agency theory perspective


Existing research has overlooked the interaction of debt in the financial assessment of asset-light strategies. This research assesses how financial leverage (high or low long-term debt) interacts with management contracts as well as franchising to exert an impact on the value of hotel companies. Panel data of 195 observations in 2007–2019 were analysed with ordinary least square, robust regression, stepwise regression and quantile regression. The research findings clarify the impacts of asset-light strategies by differentiating the previously discovered U-shaped impact into a U-shape for management contracts and an inverted U-shape for franchising. Furthermore, when financial leverage is introduced, the above relationships hold at a low leverage level; but are weakened at a high level. Lastly, these U-shapes are asymmetrical, being more responsive to asset-light strategies than when there is no leverage interaction. This research hence clarifies agency costs and their relevance to asset-light strategies with varying financial leverage.

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Ji, Kate Mingjie
Wang Juanxi
Boccardo, Luca
Brown, Howard
Wong, Ipkin Anthony
Wu Jiao

Oxford Brookes departments

Oxford School of Hospitality Management
Department of Accounting, Finance and Economics


Year of publication: 2023
Date of RADAR deposit: 2023-10-20

Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License

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