Risk return and cost of equity of small and large casual-dining restaurants |
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Authors: | Melih Madanoglu Mehmet Erdem Dogan Gursoy |
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Affiliation: | 1. Division of Resort and Hospitality Management, Florida Gulf Coast University, 10501 FGCU Blvd S., Ft. Myers, FL 33965, USA;2. Department of Hotel Management, University of Nevada Las Vegas, Las Vegas, NV, USA;3. Department of Hospitality and Restaurant Management, Washington State University, Pullman, WA, USA |
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Abstract: | Although the financial performance of US casual-dining restaurants has been better than returns in other restaurant segments, it is not known how large and small casual-dining restaurant companies perform when their stock returns are adjusted for risk. The present study uses traditional and contemporary risk-adjusted performance and cost of equity models to fill the void in this area of research. The results indicate that large casual-dining restaurants outperformed their smaller counterparts on a risk-adjusted basis, and had a lower cost of equity for the 1998–2002 period. In addition, the findings demonstrate that the cost of equity estimates pose some serious challenges when sub-periods before and after September 11 events are included in the analysis. |
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Keywords: | Risk-adjusted performance Cost of equity Casual-dining restaurants Downside risk |
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