Investment–cash flow sensitivities of restaurant firms

Serin Choi, Seoki Lee, Kyuwan Choi and Kyung-A Sun
Additional contact information
Serin Choi: Korea Foodservice Industry Research Institute, Republic of Korea
Seoki Lee: The Pennsylvania State University, USA
Kyuwan Choi: Kyung Hee University, Republic of Korea
Kyung-A Sun: Temple University, USA

Tourism Economics, 2018, vol. 24, issue 5, 560-575

Abstract: Although some theories argued that investment decisions are irrelevant to financing decisions under the assumption of perfect market, investment decisions and capital structure seem interdependent in real-world circumstances. Further, the past literature also suggested a close relationship between internal cash flows and investment decisions, that is, investment–cash flow sensitivity (ICFS), but this issue has not been closely examined in the restaurant setting. Therefore, the current study first proposes to examine ICFS in the context of the restaurant industry. More importantly, this study also examines a moderating role of franchising to better explain ICFS, considering a major role of franchising in the restaurant industry, based on theories of pecking order, resource scarcity, and risk sharing. Findings of the current study deepens the understanding of ICFS via franchising, making meaningful contributions to not only to existing ICFS literature but also restaurant franchising literature.

Keywords: franchising; investment–cash flow sensitivity; moderating effect; restaurant industry (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:toueco:v:24:y:2018:i:5:p:560-575

DOI: 10.1177/1354816618759201

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