IDEAS home Printed from https://ideas.repec.org/a/sae/toueco/v27y2021i7p1417-1429.html
   My bibliography  Save this article

The effect of inventory turnover on financial performance in the US restaurant industry: The moderating role of exposure to commodity price risk

Author

Listed:
  • Eunhye (Olivia) Park

    (The Hong Kong Polytechnic University, Hong Kong)

  • Woo-Hyuk Kim

    (Incheon National University, South Korea)

Abstract

Despite the importance of efficiently managing inventory in the restaurant business, evidence of satisfactory inventory turnover in the restaurant industry remains limited. This study examined the relationship between inventory turnover and firm performance as well as the moderating role of exposure to commodity price risk therein. We collected data representing publicly traded US restaurant companies from the Mergent Online’s database for the period from 1999 to 2015. The results indicate there is a positive relationship between inventory turnover and corporate financial performance. Moreover, we found that the interaction effect of exposure to commodity price risk on the relationship between inventory turnover and firms’ profitability. To our knowledge, this is the first study empirically examining the adoption of inventory management by the restaurant industry. Also, these findings provide the importance of effective inventory management based on the specific type of restaurants.

Suggested Citation

  • Eunhye (Olivia) Park & Woo-Hyuk Kim, 2021. "The effect of inventory turnover on financial performance in the US restaurant industry: The moderating role of exposure to commodity price risk," Tourism Economics, , vol. 27(7), pages 1417-1429, November.
    • Handle: RePEc:sae:toueco:v:27:y:2021:i:7:p:1417-1429
    DOI: 10.1177/1354816620923860
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/1354816620923860
    Download Restriction: no
    File URL: https://libkey.io/10.1177/1354816620923860?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Vedran Capkun & Ari-Pekka Hameri & Lawrence A. Weiss, 2009. "On the relationship between inventory and financial performance in manufacturing companies," Post-Print hal-00493163, HAL.
    2. Christopher Gilbert & Wyn Morgan, 2010. "Has food price volatility risen?," Department of Economics Working Papers 1002, Department of Economics, University of Trento, Italia.
    3. Hsiao, Chiu-Ming & Zhang, Wei-Fang & Chiu, Chi-Chang & Huang, Jung-Chang & Huang, Yu-Ling, 2017. "The Enterprise Risk Management of Foreign Exchange Exposures: Evidence from Taiwanese Hospitality Industry," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 4(1), pages 32-48.
    4. Mitchell A. Petersen & S. Ramu Thiagarajan, 2000. "Risk Measurement and Hedging: With and Without Derivatives," Financial Management, Financial Management Association, vol. 29(4), Winter.
    5. Antonino Buscemi, 2015. "Ebitda as a Criterion for Assessment of the Banks System: The Case of Deutesche Bank, Generali and Unicredit," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 5(3), pages 1-3.
    6. Huynh, Candice H. & Pan, Wenting, 2015. "Operational strategies for supplier and retailer with risk preference under VMI contract," International Journal of Production Economics, Elsevier, vol. 169(C), pages 413-421.
    7. Vishal Gaur & Saravanan Kesavan & Ananth Raman & Marshall L. Fisher, 2007. "Estimating Demand Uncertainty Using Judgmental Forecasts," Manufacturing & Service Operations Management, INFORMS, vol. 9(4), pages 480-491, April.
    8. Charles F. Beauchamp & William G. Hardin III & Matthew D. Hill & Chris M. Lawrey, 2014. "Frictions And The Contribution Of Inventory To Shareholder Wealth," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 37(3), pages 385-404, September.
    9. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3‐4), pages 573-588, April.
    10. Marshall Blake & Nelda Mahady, 1991. "How Mid‐Sized Companies Manage Risk," Journal of Applied Corporate Finance, Morgan Stanley, vol. 4(1), pages 59-65, March.
    11. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3-4), pages 573-588.
    12. Dimitrios P. Koumanakos, 2008. "The effect of inventory management on firm performance," International Journal of Productivity and Performance Management, Emerald Group Publishing Limited, vol. 57(5), pages 355-369, June.
    13. Vishal Gaur & Marshall L. Fisher & Ananth Raman, 2005. "An Econometric Analysis of Inventory Turnover Performance in Retail Services," Management Science, INFORMS, vol. 51(2), pages 181-194, February.
    14. Vishal Gaur & Saravanan Kesavan, 2015. "The Effects of Firm Size and Sales Growth Rate on Inventory Turnover Performance in the U.S. Retail Sector," International Series in Operations Research & Management Science, in: Narendra Agrawal & Stephen A. Smith (ed.), Retail Supply Chain Management, edition 2, chapter 0, pages 25-52, Springer.
    15. Hsiao, Chiu-Ming & Zhang, Wei-Fang & Chiu, Chi-Chang & Huang, Jung-Chang & Huang, Yu-Ling, 2017. "The Enterprise Risk Management of Foreign Exchange Exposures: Evidence from Taiwanese Hospitality Industry," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 4(1), pages 32-48.
    16. Brennan, Michael J & Schwartz, Eduardo S, 1985. "Evaluating Natural Resource Investments," The Journal of Business, University of Chicago Press, vol. 58(2), pages 135-157, April.
    17. Sohnke M. Bartram, 2005. "The Impact of Commodity Price Risk on Firm Value - An Empirical Analysis of Corporate Commodity Price Exposures," Multinational Finance Journal, Multinational Finance Journal, vol. 9(3-4), pages 161-187, September.
    18. Vedran Capkun & Ari-Pekka Hameri & Lawrence A. Weiss, 2009. "On the relationship between inventory and financial performance in manufacturing companies," Post-Print hal-00466392, HAL.
    19. Seoki Lee & Yoon Koh & Cindy Yoonjoung Heo, 2011. "Research Note: Internationalization of US Publicly Traded Restaurant Companies – a Transaction Cost Economics Perspective," Tourism Economics, , vol. 17(2), pages 465-471, April.
    20. Hsiao, Chiu-Ming, 2017. "Enterprise Risk Management with Foreign Exchange Exposures : Evidence from Taiwan Tourism Industry," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 7(9), pages 882-906, September.
    21. Pedro Juan García‐Teruel & Pedro Martínez‐Solano, 2007. "Effects of working capital management on SME profitability," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 3(2), pages 164-177, April.
    22. Cannon, Alan R., 2008. "Inventory improvement and financial performance," International Journal of Production Economics, Elsevier, vol. 115(2), pages 581-593, October.
    23. Lee, Seul Ki & Jang, SooCheong (Shawn), 2011. "Foreign exchange exposure of US tourism-related firms," Tourism Management, Elsevier, vol. 32(4), pages 934-948.
    24. Cheng, Mei & Dhaliwal, Dan & Zhang, Yuan, 2013. "Does investment efficiency improve after the disclosure of material weaknesses in internal control over financial reporting?," Journal of Accounting and Economics, Elsevier, vol. 56(1), pages 1-18.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jaehee Gim & SooCheong Jang, 2024. "The determinants of aggressive share buybacks: An empirical examination of U.S. publicly traded restaurant firms," Tourism Economics, , vol. 30(1), pages 132-151, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brandenburg, Marcus, 2016. "Supply chain efficiency, value creation and the economic crisis – An empirical assessment of the European automotive industry 2002–2010," International Journal of Production Economics, Elsevier, vol. 171(P3), pages 321-335.
    2. Kroes, James R. & Manikas, Andrew S., 2014. "Cash flow management and manufacturing firm financial performance: A longitudinal perspective," International Journal of Production Economics, Elsevier, vol. 148(C), pages 37-50.
    3. Zbigniew Gołaś, 2020. "The effect of inventory management on profitability: evidence from the Polish food industry: Case study," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 66(5), pages 234-242.
    4. Godfred Adjapong Afrifa & Ahmad Alshehabi & Ishmael Tingbani & Hussein Halabi, 2021. "Abnormal inventory and performance in manufacturing companies: evidence from the trade credit channel," Review of Quantitative Finance and Accounting, Springer, vol. 56(2), pages 581-617, February.
    5. Folinas, Dimitris & Shen, Chia-Yi, 2014. "Exploring Links among Inventory and Financial Performance in the Agricultural Machinery," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 2(4), pages 1-12, October.
    6. Casalin, Fabrizio & Pang, Gu & Maioli, Sara & Cao, Ting, 2017. "Inventories and the concentration of suppliers and customers: Evidence from the Chinese manufacturing sector," International Journal of Production Economics, Elsevier, vol. 193(C), pages 148-159.
    7. Zbigniew Golas, 2020. "Does Inventory Management Improve Profitability? Empirical Evidence from Polish Manufacturing Industries," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 2), pages 939-961.
    8. Kroes, James R. & Manikas, Andrew S. & Gattiker, Thomas F., 2018. "Operational leanness and retail firm performance since 1980," International Journal of Production Economics, Elsevier, vol. 197(C), pages 262-274.
    9. Robb, David J. & Liu, Fei & Lai, Richard & Ren, Z. Justin, 2012. "Inventory in mainland China: Historical, industry, and geographic perspectives," International Journal of Production Economics, Elsevier, vol. 135(1), pages 440-450.
    10. Yingying Xin & Xiao Zeng & Zhengying Luo, 2022. "Customers' tone in MD&A disclosure and suppliers' inventory efficiency: Evidence from China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3833-3853, December.
    11. Bendig, David & Brettel, Malte & Downar, Benedikt, 2018. "Inventory component volatility and its relation to returns," International Journal of Production Economics, Elsevier, vol. 200(C), pages 37-49.
    12. Isaac Elking & John-Patrick Paraskevas & Curtis Grimm & Thomas Corsi & Adams Steven, 2017. "Financial Dependence, Lean Inventory Strategy, and Firm Performance," Journal of Supply Chain Management, Institute for Supply Management, vol. 53(2), pages 22-38, April.
    13. Dbouk, Wassim & Moussawi-Haidar, Lama & Jaber, Mohamad Y., 2020. "The effect of economic uncertainty on inventory and working capital for manufacturing firms," International Journal of Production Economics, Elsevier, vol. 230(C).
    14. Masri, Hatem & Abdulla, Yomna, 2018. "A multiple objective stochastic programming model for working capital management," Technological Forecasting and Social Change, Elsevier, vol. 131(C), pages 141-146.
    15. Nida Shah, 2016. "The Impact of Working Capital Management on Firms Profitability in Different Business Cycles: Evidence from Pakistan," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 1(1), pages 58-70, March.
    16. Chauhan, Gaurav Singh, 2019. "Are working capital decisions truly short-term in nature?," Journal of Business Research, Elsevier, vol. 99(C), pages 238-253.
    17. Kirsneh Alemu Kebede, 2024. "The Effect of Availability of Foreign Exchange and Devaluation of BIRR on the Performance of Companies in Ethiopia (Instance of Sample Company)," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 99-117.
    18. Pong, Christopher K.M. & Mitchell, Falconer, 2012. "Inventory investment & control: How have UK companies been doing?," The British Accounting Review, Elsevier, vol. 44(3), pages 173-188.
    19. Hakan Özkaya & Şebnem Yaşar, 2023. "Working capital management in the food and beverage industry: Evidence from listed European companies," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 69(2), pages 78-88.
    20. Shahid Ali, 2011. "Working Capital Management and the Profitability of the Manufacturing Sector: A Case Study of Pakistan’s Textile Industry," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(2), pages 141-178, Jul-Dec.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:toueco:v:27:y:2021:i:7:p:1417-1429. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.