Special features of capital structure of small firms in tourism industry - An exploratory study

Abstract

Small and Medium Enterprises (SMEs) across the world differ on the parameters of definitions as well as the set of challenges faced. Out of the challenges faced, the major challenge seems to be finance related, especially in developing economies. This paper seeks to study the capital structure of SMEs and the preferred source of finance for the long term and short term needs in tourism sector. The concurrence with existing theories and emergence of new sources is examined with the reasons for the same. Two case studies, of small firms, in medical tourism and business tourism have been reviewed in context of extant theories. Market timing theory could be used in conjunction with pecking order to explain the order of preference. The managerial implications could be improve flow of finance to the SME sector, by elimination of bottlenecks.