Liquidity Risk and Its Determinants: A Study on Hotel Industry in United Kingdom

Abstract

Liquidity risk management is an important aspect in an organisation. It is important for an organisation to manage liquidity risk efficiently. Hence, this study attempted to investigate the influence of firm-specific factors and macro-economic factors affecting liquidity risk of hotel industry in United Kingdom. This study employs time series regression analysis of hotel in United Kingdom from 2012 to 2016. The analysis shows that firm-specific factors (current ratio and corporate governance index score) and macro-economic factor (company’s beta, inflation rate, unemployment rate, and exchange rate) that influence the liquidity risk of the hotel. This study suggest that the firms should manage their account receivable efficiently by establishing clear credit policy and incorporate more corporate governance elements such as transparency, accountability, fairness, and independence in the firms.