Franchising structure changes and shareholder value: Evidence from store buybacks and refranchising

Abstract

Drawing on agency theory and transaction cost analysis, this study investigates the impact of refranchising and buybacks of downstream retail units by franchising firms on shareholder value (i.e., stock returns). It further evaluates the contingency role of firm and industry factors in shaping this impact. An event study analysis over the years 2001–2020 confirms that both refranchising and buybacks positively affect stock returns. However, notable impact differences emerge between the two types of strategic decisions. For refranchising, firms with lower royalty rates, smaller returns-on-assets (ROA), and higher trade credit provided generate higher stock returns. Whereas, for buybacks, firms with higher royalty rates derive more value in stock markets. Analysis further shows that investors judge refranchising (buybacks) less (more) favorably in munificent industries, but industry dynamism has no effect on the stock returns generated from these moves. Together, the study offers important implications for franchising theory and retail practice in marketing.

Analysis on the impact of dynamic innovation investment strategy of green supply chain enabled by blockchain

“…The synergy of big data collection, analytics, and insights capabilities is crucial for achieving high levels of green process innovation. Academic research on innovation has been largely empirical in recent years, with both the business community and academics showing great interest in the topic ( Luu et al, 2023 ; Panda et al, 2023 ; Sørensen et al, 2023 ; Shah & Saqib, 2023 ; Jell-Ojobor, Alon & Windsperger, 2022 ; Hsu & Jang, 2009 ; Sadovnikova, Kacker & Mishra, 2023 ). Paparoidamis et al (2019) found that the degree of innovation in eco-friendly attributes positively affects consumers’ perception of a product’s eco-friendliness and willingness to adopt it.…”