Acquisitions and shareholders' returns in restaurant firms: The effects of free cash flow, growth opportunities, and franchising

Doğru, Tarik; Kizildag, Murat; Özdemir, Özcan; Erdogan, Aysa Ipek

doi:10.1016/j.ijhm.2019.102327

Cited by 31 publications

(26 citation statements)

References 39 publications

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“…This allows companies to rapidly expand without raising large amounts of external capital or taking on risks associated with owning property (Blal and Bianchi, 2019;Sohn et al, 2013). The ALBM enables fast growth with fewer capital investments (Sohn et al, 2013), allowing for greater flexibility (Gim and Jang, 2019), increased cash flow (Dogru et al, 2020) and increased available cash to return to shareholders (Poretti and Blal, 2020). Some articles, from the perspective of DC, consider the ALBM to be one of the DC-specific lodging enterprises that helps modify and update existing resources according to changes in the environment, thereby gaining a competitive advantage and achieving superior EP (Eisenhardt and Martin, 2000;Zahra et al, 2006).…”

Section: Ijchm 342mentioning

confidence: 99%

Convex-concave effect of financial flexibility on hospitality performance: quantile regression approach

Chang

2021

IJCHM

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Purpose The purpose of this paper is to study the influence of financial flexibility (FF) on enterprise performance (EP) within Taiwan’s hospitality industry during the COVID-19 shock and explore whether EP varies with hospitality industry characteristics. Design/methodology/approach Secondary data of 39 Taiwan Stock Exchange-listed hospitality firms were collected from the Taiwan Economic Journal databases. Quantile regression analysis was applied to examine the FF-EP relationship Findings The results evidence that there is a U-shaped (convex) FF-EP relationship for hospitality firms in the 10th, 25th and 50th Tobin’s Q quantiles and in asset-heavy firms. For asset-light firms, FF has an inverted U-shaped (concave) effect on EP in the 90th Tobin’s Q quantile Practical implications The empirical results highlight the need for Taiwan’s hospitality industry as a whole to take rolling adjustment and optimization of FF and concentrate on liquidity risk management after the COVID-19 pandemic and for long-term sustainability. Originality/value To the best of the authors’ knowledge, this study is one of the first to examine the nonlinear FF-EP relationship in the hospitality industry of Taiwan, particularly amid the COVID-19 shock. Moreover, this study extends current literature by revealing the hospitality industry’s FF-EP relationship and highlights the importance of the pandemic crisis context.

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Section: Ijchm 342mentioning

confidence: 99%

Convex-concave effect of financial flexibility on hospitality performance: quantile regression approach

Chang

2021

IJCHM

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“…In a recent study, Dogru et al (2020) examined the effects of free cash flow, growth opportunities, and franchising on shareholders’ returns in restaurant acquisitions and found that firms with higher free cash flows and franchising firms experience lower returns in acquisitions. Although Dogru et al (2020) investigated the question of why acquisitions can be value increasing or decreasing, the study did not examine the perplexing question of who makes acquisitions. That is, there is scant knowledge regarding the extent to which financial and organizational characteristics determine the restaurant companies’ prospect of making acquisitions.…”

Section: Introductionmentioning

confidence: 99%

Who makes acquisitions? An empirical investigation of restaurant firms

et al. 2019

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The purpose of this study is to examine the financial and operational factors that explain acquisition decisions in restaurant firms. We analyze the effects of franchising, dividends, leverage, Tobin’s Q, total assets, sales growth, and cash flows on restaurant firms’ acquisition decisions. The findings show that firms with high growth prospects and excess cash flows (i.e. small firms and franchising restaurant firms) are more likely to make acquisitions than their counterparts. Furthermore, firms with higher dividend payouts are less likely to engage in acquisition deals due to lack of cash. Shareholders perceive acquisitions to be value-decreasing only if large restaurant firms (not necessarily franchising) make acquisitions, while shareholders perceive acquisitions to be value-increasing when franchising firms make acquisitions. The findings provide partial support for the postulations of overinvestment and underinvestment theories. Theoretical and practical implications are discussed.

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“…It tells us what proceeds can be obtained from the sale of all assets, the monetary amount of the company's liabilities and what the costs of liquidation will be. The liquidation value is determined in cases where the company can no longer continue its business activities in the future [16][17][18].…”

Section: Literature Researchmentioning

confidence: 99%

Business valuation in times of crisis

2021

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Business valuation is very important and complex process, mainly in the current global situation. To determine the company value, we will base our calculations on an analysis of the internal environment of the company, which is affected by macroeconomic and microeconomic influences. The aim of this paper is to determine the value of a selected company using FCFF in an environment of negative and unplanned interventions in the economy. The main source for determining the value of the company is data obtained from the financial statements and annual reports of the limited liability company Pepco, s.r.o. from the period of 2013-2018. The method applied to the selected company is the discounted cash flow method, which is one of the most popular and most frequently used earnings methods. In the first years before the company became known on the Czech market, the value of the FCFF was more often than not in negative numbers. This also affected the value of the business. During next years, with the stable growth of the company, the value of the company also grew. We can expect that due to the global problem of COVID-19, the value of the company will decrease in 2020, but it will not have a very significant effect on its overall value.

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Acquisitions and shareholders' returns in restaurant firms: The effects of free cash flow, growth opportunities, and franchising

Cited by 31 publications

References 39 publications

Convex-concave effect of financial flexibility on hospitality performance: quantile regression approach

Convex-concave effect of financial flexibility on hospitality performance: quantile regression approach

Who makes acquisitions? An empirical investigation of restaurant firms

Business valuation in times of crisis

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