Leverage Adjustment in Italian Hospitality MSMES: An Empirical Analysis of Capital Structure Dynamics

This thesis examines capital structure adjustment dynamics within Italian hospitality micro, small and medium-sized enterprises (MSMEs). Drawing on the Dynamic Trade-Off Theory, the study investigates whether firms adjust leverage toward a target capital structure and how rapidly this adjustment occurs. The empirical analysis is conducted on a panel of Italian hotel firms over the period 2015–2024 using Dynamic Fixed Effects and System Generalized Method of Moments (SYS-GMM) estimators. Particular attention is devoted to the treatment of shareholder loans, which are alternatively classified as debt and as quasi-equity in order to assess their impact on leverage measurement and adjustment dynamics. The results provide evidence consistent with the existence of target leverage behavior across all model specifications. Firms appear to gradually adjust leverage toward a desired level, although adjustment speeds vary considerably across firm-size categories and leverage definitions. In particular, micro firms exhibit slower adjustment dynamics, reflecting the financing constraints and structural characteristics typically associated with hospitality MSMEs. While the treatment of shareholder loans influences leverage persistence and estimated adjustment speeds, it does not alter the overall evidence supporting target capital structure behavior. The findings contribute to the capital structure literature by providing new evidence on leverage adjustment within hospitality MSMEs and by highlighting the importance of firm characteristics and leverage measurement choices when interpreting adjustment dynamics.