The moderating role of brand diversification on the relationship between geographic diversification and firm performance in the US lodging industry

In spite of the prevalence and strategic importance of diversification for US lodging firms, research on the effects of diversification has been insufficient in the hospitality literature. Especially, an examination of the moderating effect of brand diversification on the relationship between geographic diversification and performance of US lodging firms has been lacking in the literature in various disciplines, including hospitality field thus far. This study aims to first investigate the individual effect from each of brand and geographic diversification strategy on firm performance in the US lodging industry. Further, to investigate effects of diversification comprehensively, this study examines the moderating effect of brand diversification on the relationship between geographic diversification and performance of US lodging firms. The study's results indicate a positive and significant effect of geographic diversification on firm performance, an insignificant effect of brand diversification, and a positive and significant moderating effect of brand diversification in the US lodging industry.     

Impacts of geographic diversification on restaurant firms’ risk: Domestic vs. international diversification

In the hospitality context, the diversification literature has evolved to mostly focus on the impact of diversification on firm performance. However, without accounting for risk, the effect of diversification on firm value likely provides an incomplete picture. Therefore, this study investigates the influence of domestic and international geographic diversification on restaurant firms’ risk. This study uses the Berry-Herfindahl Index to measure the degree of domestic and international geographic diversification. Findings show a non-linear relationship between geographic diversification and restaurant firms’ risk. However, different shapes of the non-linear relationship are revealed between domestic and international geographic diversification and between operational and market-based risk. The results of this study indicate that the risk-reduction effects argued from the modern portfolio theory may be partially applicable to the geographic diversification for restaurant firms, suggesting a different view toward financial diversification and corporate diversification.     

Does franchising help restaurant firm value?

A company's financial performance is of keen interest to many groups of people, including management, employees, shareholders, government, and so on. Although franchising has been one of the most common strategies to maximize a firm's financial performance in the restaurant industry, little research has been conducted regarding the relationship between the degree of franchising and the restaurant firm's financial performance. This study initially proposed a sigmoid relationship between the degree of franchising and the restaurant firm's financial performance based on the diversification theory. Findings, however, do not fully support the sigmoid relationship; rather a more quadratic or inverted U-shaped relationship was found.     

The relationship between board diversity and firm performance in the lodging industry: The moderating role of internationalization

Following the emphasis on board diversity and its roles on firm performance, an examination on the relationship between board diversity and firm performance in the lodging industry is conducted. Further, this study employs internationalization, a moderator, to more comprehensively investigate the board diversity-firm performance relationship. This study found that gender diversity shows a positive and significant effect on firm performance while age diversity has an insignificant effect on firm performance. Regarding the moderating effect of internationalization, the degree of internationalization significantly magnifies the effect of gender diversity on firm performance but insignificantly moderates the effect of age diversity on firm performance. This study attempts to contribute to the hospitality and tourism literature by examining the topic that has been rarely dealt with and provide practical guidelines for stakeholders of a lodging firm especially when selecting board members.     

Does size matter? Corporate social responsibility and firm performance in the restaurant industry

Despite an increasing number of hospitality studies on the link between corporate social responsibility (CSR) and corporate financial performance (CFP), the literature has predominantly focused on the CSR–CFP relation without considering moderating factors. Consequently, the current study introduces firm size as a potential moderator on the CSR–CFP relationship. Performing a two-way fixed-effects model by firm and year with Newey-West standard errors, this study finds that firm size moderates the effect of positive CSR on CFP while it does not moderate the effect of negative CSR on CFP in the U.S. restaurant context.     

Moderating effect of capital intensity on the relationship between leverage and financial distress in the U.S. restaurant industry

During the recent and ongoing economic turmoil, countless businesses have been facing financial distress and many have filed for bankruptcy. This issue is especially critical for the restaurant industry due to restaurants’ sensitivity to economic fluctuations. Therefore, the purpose of this study is to examine the financial distress issue in the U.S. restaurant industry. In particular, the study examines a moderating effect of capital intensity on the relationship between a firm's leverage and degree of financial distress. The dataset includes publicly traded U.S. restaurant firms during the period 1990–2008. The study measures the degree of financial distress by modified Z-scores, and findings suggest a positive moderating effect of capital intensity on the relationship between leverage and financial distress.     

Effect of diversification on firm performance: Application of the entropy measure

This study investigated the effects of diversification on firm performance in the restaurant industry. In prior studies, the theoretical rationales and empirical results appeared to contradict each other. These contradictory results may be due to factors such as industry-specific characteristics or a linear understanding of the relationship between diversification strategies and firm performance. Thus, this study suggested a non-linear hypothesis based on the costs and benefits of diversification strategies with businesses categorized based on their level of diversification. The results of this study showed that restaurant firms do not benefit from a low level of related diversification. This study also found that when restaurant firms are involved in both related and unrelated businesses, the optimal mixed ratio of diversification is approximately half and half. More detailed results, as well as academic and practical implications, are discussed in this paper.     

Board diversity and firm performance in the U.S. tourism sector: The effect of institutional ownership

This study examines the relationship between board diversity and firm performance in the U.S. tourism sector by using institutional ownership as a contingency that moderates this relationship. The study's sample includes publicly-traded companies from the U.S. restaurant, hotel and airline industries. The hypotheses are tested via two-way fixed-effects regression, and the findings of the study indicate that board diversity is positively associated with financial performance (Tobin's Q), and the effect of board diversity on performance is contingent on the degree of institutional ownership. More precisely, the study finds that board diversity has a larger effect on financial performance when institutional ownership is low on a tourism firm's ownership structure. Overall, the findings suggest that boards' internal control and monitoring on management is important to derive higher financial performance, and even yet it is more important when external monitoring by institutional owners, proxied by percentage of institutional ownership, is weak.     

How does social capital influence the hospitality firm's financial performance? The moderating role of entrepreneurial activities

Although previous studies have examined the relationship between social capital and firm performance under boundary conditions such as firm age, industry characteristics, and institutional conditions, the literature is silent on the types of firm activities linking social capital to financial performance. This study investigates the moderating role of firm-level entrepreneurial activities (service innovation, corporate venturing and strategic renewal) on the relationship between social capital and financial performance in a sample of Chinese hotels. The findings indicate that the interaction of external and internal social capital has a positive effect on financial performance. In addition, innovation and corporate venturing enhance the relationship between financial performance and social capital. To achieve a competitive advantage, hospitality firms should not only accumulate social capital but should also deliberately implement strategies that enhance entrepreneurial activities to fully unleash the potential of social capital.     

Effects of within-industry diversification and related diversification strategies on firm performance

The major objective of this study was to investigate the effects of within-industry diversification and related diversification on short and long-run firm performance in the restaurant industry. Accordingly, this study decomposed Jacquemin and Berry's (1979) traditional related diversification entropy into within-industry diversification entropy and pure related diversification entropy. Further, this study examined the interaction effect of within-industry and related diversification strategies on firm performance. The results of this study suggested that in the short-run within-industry diversification strategies have a negative impact on firm profitability but no significant effect on sales growth. However, the long-run effect of within-industry diversification was significantly positive in terms of profitability but not sales growth. This study also showed that related diversification strategies had a positive and significant effect on profitability in the short-run, which turned negative and significant in the long-run. Further, the interaction model indicated that when the two strategies are simultaneously carried out synergy is quickly realized because efficiency is enhanced. A more detailed discussion of the results is provided in the main body of this paper.     

An examination of executive compensation in the restaurant industry

The purpose of this empirical study is to examine executive compensation in the restaurant industry. The effects of a set of accounting-based performance measures, market-based performance measures, and executive-related factors on the compensations of firm CEOs, other senior executive managers, and board members were examined. Drawn from 16 consecutive years of data and a sample of over 2200 observations from restaurant companies, the findings revealed that determinants of equity based compensation vary by different types of executives. In addition, this study supports the notion that executive compensation in the restaurant industry is determined not only by firm performance measures but also by executive-related characteristics such as tenure.     

Tourism firm restructuring: Does the attention of individual investor matter?

We examine the power of individual investor attention in increasing tourism firms' restructured performance, the different effects caused by ‘attention heterogeneity’, the moderating effect of media coverage on the relationship between individual investor attention and tourism firms' restructured performance, and the robustness of the effects. The results indicate that 1) individual investor attention has a significant positive effect on tourism firms' restructured performance, 2) individual investor attention via mobile devices influences tourism firms' restructured performance more than attention via computers, 3) the moderating effect of media coverage on this relationship varies with time and media heterogeneity, and 4) the effect of individual investor attention is immediate, while time is needed for the moderating effect of media coverage to appear. The main effect of individual investor attention and the moderating effect of media coverage on tourism firm performance do not depend on the firm size or the proportion of individual shareholders.     

Impact of brand recognition and brand reputation on firm performance: U.S.-based multinational restaurant companies’ perspective

Given the importance of a firm's performance, which is of significant interest to many groups of people including management, shareholders and governments, this study aims to examine the impact of brand recognition and brand reputation on firm performance within the U.S. multinational restaurant company context. The study findings suggest that brand reputation, in general, has a positive influence on a firm's value performance but no significant relationship with accounting performance. Brand recognition shows no significant relationship with both value and accounting performance measures controlling for the degree of internationalization of a multinational restaurant company.     

Insider ownership and firm performance: An examination of restaurant firms

This study investigated the relationship between insider ownership and firm performance in the restaurant industry. Convergence-of-interests and entrenchment hypotheses were tested via cross-sectional and panel two-stage least square (2SLS) GMM estimation methods for linear and non-linear models. The study found that there is an overall positive and significant relationship between insider ownership and firm performance. The quadratic model showed that restaurant firm performance increased until insider ownership was between 38 and 40%, whereas it decreased after that point. Consistent with the quadratic model, the piece-wise regression model showed that insider ownership had a positive impact on firm performance within a range of 5–25% and a negative influence beyond 25% insider ownership. Consequently, this study revealed that convergence-of-interests and entrenchment effects of insider ownership co-exist in the restaurant industry. While convergence-of-interests effects are effective, an excessive granting of stock options or awards to managers could weaken firm performance due to entrenchment effects.     

The effects of product diversification on firm performance and complementarities between products: A study of US casinos

In spite of the growing importance of product diversification strategy and the existence of varying degrees of product diversity in the US casino industry, research of the effect of product diversification on firm performance has been sparse. By examining the impact of the degree of product diversification on both financial market- and accounting-based firm performance of sampled US casinos and complementarities between products, this study attempts to fill the gap in the hospitality literature. Results of this study show an inverse U-shaped relationship between the degree of product diversification and firm performance and complementarities between gaming business and food and beverage (F&B) business. These findings suggest that US casinos take into account both costs and benefits associated with product diversification, and consider F&B operations more preferentially as a supplementary business when implementing product diversification strategy.     

The corporate social responsibility–financial performance link in the U.S. restaurant industry: Do economic conditions matter?

This study examines the role played by economic conditions (recessionary periods) on the link between corporate social responsibility (CSR) and corporate financial performance (CFP) in the U.S. restaurant industry. The choice of industry setting is based on the fact that the restaurant industry is subject to consumer discretionary expenditures and is thus highly sensitive to the state of the economy. This study further examines the relationship between CSR and CFP by dichotomizing CSR activities based on whether they are related to the firm's core operations or not, thus parsing out the effect of operations-related (OR) and non-operations-related (Non-OR) CSR activities, providing a more nuanced explanation of how some CSR activities may be more beneficial than others, to firm value in hard economic times.     

Impact of the COVID-19 pandemic: Evidence from the U.S. restaurant industry

The current study examines how the effect of COVID-19 on U.S. restaurant firms’ stock returns varies according to the firms’ pre-pandemic characteristics by employing three firm-level dimensions (financial conditions, corporate strategies, and ownership structure). Employing 795 firm-year observations obtained from annual reports and other databases, this study found that restaurant firms with past characteristics of larger size, more leverage, more cash flows, less ROA, and more internationalization are more resilient to stock declines reacting to COVID-19 than otherwise similar firms. Whereas, dividend, franchising, institutional ownership, and managerial ownership did not show any significant moderating effect on the relationship between COVID-19 and stock returns. This study sheds light on the research topic by providing insights into drivers of restaurant firm’s stock returns during the COVID-19 shock. Future studies can employ the variables and method used in the current study to extend the understanding of the issue.     

Diversification strategies and failure rates in the Texas lodging industry: Franchised versus company-operated hotels

This research examines the relationship between geographic, brand, and segment diversification and hotel failure rates based on ownership structure, i.e. franchised and company-operated hotels, in the Texas lodging industry. Literature on diversification strategies is mainly based on financial measures of performance and offers mixed results; only few studies have assessed firm failure rates directly based on distinct diversification strategies at the establishment level. The performance outcomes are significantly heterogeneous not only based on the strategies, but also on the ownership structures, which are yet to be examined. Using data from the Texas Comptroller of Public Accounts from 2000 to 2018, a semi-parametric Cox proportional hazard model is estimated, and the findings reveal that failure rates are not significantly tied to particular types of diversification and ownership structures. This research provides insights on hotel diversification strategies and their relative dominance on hotel failure rates based on franchised and company-operated hotels.     

Customer perceived control and the moderating effect of restaurant type on evaluations of restaurant employee performance

The purpose of this study was to examine the effect of customer perceptions of control within the dining experience on their perceptions of employee performance. The moderating influence of restaurant type on the relationship between perceived control and evaluations of employee performance was also examined. Results indicate that high perceived control leads to higher perceptions of employee performance than low perceived control. Results also suggest that increased control has a greater positive effect on employee performance ratings in fine dining restaurants than in more casual restaurant environments.     

Corporate social responsibility and firm performance in the airline industry: The moderating role of oil prices

This study, first, proposes corporate social responsibility (CSR) dimensions as associated with operation-relatedness (i.e., operation-related [OR] and non-operation-related [Non-OR] CSR activities), following the Carroll CSR framework. In addition, the study examines and compares the effects of OR and Non-OR CSR dimensions on U.S. airlines' performances, and the final examination concerns the moderating effect of oil prices on the relationship between the OR (Non-OR) CSR dimension and firm performance. Findings of this study support a positive main effect from OR on firm performance. In addition, findings support the positive (negative) moderating effect of oil prices on the relationship between OR (Non-OR) CSR dimension.