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Short-Term Debt and Firm Performance in the US Restaurant Industry: The Moderating Role of Economic Conditions

Author

Listed:
  • Seoki Lee

    (School of Hospitality Management, The Pennsylvania State University, 217 Mateer, University Park, PA 16802, USA)

  • Michael C. Dalbor

    (William F. Harrah College of Hotel Administration, University of Nevada, Las Vegas, NV 89154-6013, USA)

Abstract

Based on the strategic debt argument, this study hypothesizes that short-term debt generally leads a restaurant firm to poor performance due to the lack of a strategic approach from using short-term debt. The study further examines the moderating role of economic conditions in the relationship between short-term debt and firm performance through a pooled regression analysis with heteroscedasticity-consistent standard errors. The data are from publicly traded US restaurant firms for the period 1990–2009. The findings support the research hypothesis that short-term debt in general has a negative impact on the performance of restaurant firms, while the negative effects are significantly reduced during economic downturns.

Suggested Citation

  • Seoki Lee & Michael C. Dalbor, 2013. "Short-Term Debt and Firm Performance in the US Restaurant Industry: The Moderating Role of Economic Conditions," Tourism Economics, , vol. 19(3), pages 565-581, June.
    • Handle: RePEc:sae:toueco:v:19:y:2013:i:3:p:565-581
    DOI: 10.5367/te.2013.0219
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    References listed on IDEAS

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    1. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    2. Korajczyk, Robert A. & Levy, Amnon, 2003. "Capital structure choice: macroeconomic conditions and financial constraints," Journal of Financial Economics, Elsevier, vol. 68(1), pages 75-109, April.
    3. Levy, Amnon & Hennessy, Christopher, 2007. "Why does capital structure choice vary with macroeconomic conditions?," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1545-1564, September.
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    Cited by:

    1. Henry Mugisha & Job Omagwa & James Kilika, 2021. "Capital structure, market conditions and financial performance of small and medium enterprises in Buganda Region, Uganda," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(3), pages 276-288, April.
    2. Victor Motta, 2017. "Are SMEs in the hospitality industry less likely to experience credit constraint than other industries in the service sector? Evidence from Latin America," Tourism Economics, , vol. 23(7), pages 1398-1418, November.
    3. Meftah Gerged, Ali & Kuzey, Cemil & Uyar, Ali & Karaman, Abdullah S., 2023. "Does investment stimulate or inhibit CSR transparency? The moderating role of CSR committee, board monitoring and CEO duality," Journal of Business Research, Elsevier, vol. 159(C).
    4. Pompei Mititean, 2022. "Is The Financial Performance Affected By Board Characteristics During Covid-19? Evidence From The Energy Industry," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 7(special), pages 100-110, June.
    5. Luís Pacheco & Fernando Tavares, 2017. "Capital structure determinants of hospitality sector SMEs," Tourism Economics, , vol. 23(1), pages 113-132, February.

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