DETERMINANTS OF FINANCIAL DISTRESS IN THREE AND FOUR STAR HOTELS IN CASE OF ADDIS ABABA, ETHIOPIA.

Abstract

Financial distress is a condition in which a company or individual cannot generate sufficient revenues or income, making it unable to meet or pay its financial obligations. This is generally due to high fixed costs, revenues sensitive to economic downturns. This study examines the determinants of financial distress in three and four stars’ hotels in Addis Ababa Ethiopia using secondary data that covers the period 2015-2019. The source of this secondary data was Ministry of Revenue. The study employs descriptive statistics and the multiple liner regression models to identify the factors that affecting financial distress using stata 14 statistical package. The findings of the study show that financial distress is positively and significantly associated with profitability and solvability while efficiency is negatively and significantly related with the financial distress in the three and four stars’ hotel. Leverage, liquidity and firm size was omitted from the regression model related with high multicollinearity effect. The overall result showed there is a financial distress in Addis Ababa Ethiopia. The hotel sectors should be maintaining and improving efficiency by hiring advanced and professional employee, restructure management team, make different employee incentives to appreciate their morals.