Indicating restaurant firms’ financial constraints: a new composite index
International Journal of Contemporary Hospitality Management
ISSN: 0959-6119
Article publication date: 11 April 2019
Issue publication date: 30 April 2019
Abstract
Purpose
The purpose of this study is to develop an index for financial constraints, specifically for restaurant firms, and to further validate the developed financial constraint index.
Design/methodology/approach
This study used logistic regression with a composite criterion based on the dividend payout ratio, KZ index and Cleary index to estimate restaurant firms’ financial constraints. Then, a fixed-effects regression was used to verify the validity of the measurement of restaurant firms’ financial constraints.
Findings
A restaurant firm’s operating profit, financial leverage, asset tangibility, sale of fixed assets and percentage change in number of employees are critical indicators for identifying financial constraints. The results indicated that in cases with positive operating cash flows, the effect of operating cash flow on capital investments continuously decreased as restaurant firms’ financial constraints increased.
Originality/value
This study is unique in that the specific financial and operational characteristics of restaurant firms were included in the model to determine financial constraint indicators, such as sale of fixed assets and percentage change in number of employees.
Keywords
Citation
Mun, S.G. and Jang, S.(S). (2019), "Indicating restaurant firms’ financial constraints: a new composite index", International Journal of Contemporary Hospitality Management, Vol. 31 No. 4, pp. 2014-2031. https://doi.org/10.1108/IJCHM-06-2018-0466
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited