Maximizing Shareholder Wealth: Understanding Systematic Risk in the Restaurant Industry

ABSTRACT

Investors describe the uncertainty of a business's success or failure as risk, and managers must monitor this risk because it affects a company's cost of capital, market value, and ultimately shareholder wealth. Using regression analysis, this study reexamined how the systematic (market-related) risk of a company's common stock is linked to corporate behavior and financial performance. The results suggest that properly investing excess cash flow in operating assets and high asset turnover may lower systematic risk and, depending on a company's stage of development, director turnover may increase systematic risk.