RELATIONSHIP BETWEEN THE COST OF DEBT AND THE QUALITY OF FINANCIAL INFORMATION IN PORTUGUESE HOTEL COMPANIES

Abstract

The main objective of this work is to understand if there is a relationship between the Quality of Financial Information (QFI) and the cost of debt capital of companies, ie, it is intended to verify whether a better QFI provides a lower cost of debt. The analysis has as object of study the Portuguese companies in the hotel sector. For this, was used a sample consisting of 13.956 observations of Portuguese companies in the hotel sector, taken through the SABI database, for the period between 2011 and 2019. After measurement the QFI according to Jones (1991) model, the analysis model that allows verifying the relationship between the two main variables under study, ie, the cost of debt capital, as a dependent variable, and the QFI, as an independent variable, is estimated by Ordinary Least Square. Other independent variables related to the capital structure are
also considered, such as tangibility and profitability of assets, current liquidity, business risk and the size of the company. The empirical results allow us to conclude that the lower the QIF, the higher the cost of debt. The results also show that the tangibility of assets, business risk and size have a negative relationship with the cost of debt, while profitability has a positive relationship with it. Therefore, managers must pay attention to these variables, in order to obtain lower external financing costs.