Differences in Financial Characteristics Between Small and Large Firms: An Empirical Examination of the Casino Industry

Abstract

This study examines the differences in financial characteristics between small and large firms in the rapidly expanding casino industry. Financial ratios from 50 casino firms from the fiscal year 1995 are examined to determine the differences between small and large firms. Firms are classified into small and large groups based on the median value of total asset size for sample firms. Wilcox Rank Sum Test, a non-parametric test, is used to test for differences in the financial characteristics of small and large firms. The main results are that smaller firms have higher liquidity and short-term debt ratios. Larger firms have a higher proportion of long term and total debt. Larger firms do not appear to enjoy economies of scale, as they have lower efficiency ratios. However, larger firms also are more profitable.

Financial features of dividend-paying firms in the hospitality industry: A logistic regression analysis

“…In our sample, while 41% of the sample firms had dividend payouts, only 13% of casino hotels paid out dividends. Over the past decade (1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007), U.S. casino hotels have grown significantly with an average annual revenue growth rate of 12.50% (Upneja et al, 2000;Price Waterhouse Cooppers, 2007). According to a report published by American Gaming Association (2008), U.S. casino industry is offering positive investment opportunities for investors because compliance with regulations and taxation makes the industry's business dealings completely transparent.…”

Credit Availability and Capital Structures: Does Size Matter? An Analysis of the U.S. Lodging Industry

“…At the same time, several studies have looked at the effect of firm size on the financial performance and debt of hospitality firms (Dalbor, Kim & Upneja, 2004;Gustin & Kwansa, 1995;Sheel & Wattanasuttiwong, 1998;Upneja, Kim, & Singh, 2000). However, there exists a gap in terms of analyzing the capital structure of lodging firms at different credit availability times.…”

“…Most of the previous research studies in the area of hospitality firms analyzed the capital structure of lodging firms or the prevalent leverage with other relevant variables (Kim, 1995;Kwansa & Cho, 1995;Nuri & Archer, 2001;Sheel, 1994;Tang & Jang, 2007;Upneja & Dalbor, 2001a, 2001b. At the same time, several studies have looked at the effect of firm size on the financial performance and debt of hospitality firms (Dalbor, Kim & Upneja, 2004;Gustin & Kwansa, 1995;Sheel & Wattanasuttiwong, 1998;Upneja, Kim, & Singh, 2000).…”

Excess Returns in Hospitality Stocks

“…Multiple combinations of financial ratios can be developed that can provide valuable financial information. More than a dozen studies were conducted in the U.S. that focused specifically on the utilization of financial ratios in the hospitality industry (e.g., Gu, 2001;Singh, 2001;Upneja, Kim, & Singh, 2000;Singh & Schmidgall, 2001;Ryu & Jang, 2004;Schmidgall & DeFranco, 2004;Kim & Ayoun, 2005). Gu (2001) examined the financial situation of large and small casinos.…”

“…The study concluded that larger casinos have better liquidity, higher returns on invested capital, and higher returns on average assets in contrast with small casinos. Upneja et al (2000) examined the financial characteristics between small and large casinos. The classification of firms was done based on the median value of total assets for sample firms.…”