The Relationship Between Financial Factors and Firm Performance: Empirical Evidence from U.S. Restaurant Firms

ABSTRACT

This study empirically investigates the relationship between firm-wise financial factors and firm performance in the restaurant industry from 2000 to 2004 using panel data regression. A fixed effects model was determined to be the appropriate approach for the investigation. The model identifies debt leverage and activity as significant financial factors affecting restaurant firm performance. On the other hand, the intercept of the model was found to play an equally important role in a restaurant firm's market performance, implying that firm-wise nonfinancial factors should be examined in future research.

KEYWORDS:

• Financial factors
• firm performance
• restaurant industry
• fixed effects model

Notes

Bodnar, G., Tang, C., & Weintrop, J. (1998). Both sides of corporate diversification: The value impacts of geographic and industrial diversification. Working paper, Wharton School, University of Pennsylvania.

Clay, D. G. (2001). Institutional ownership, CEO incentives, and firm value. Unpublished doctoral dissertation, University of Chicago.

National Restaurant Association. (2005). 2005 Restaurant Industry Forecast, NRA.