Formal and informal SME financing in the restaurant industry: The impact of macroenvironment

Michael S. Lin, Hyoung Ju Song, Amit Sharma, Seoki Lee

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

In recognition of the significance of external business environments for small to medium-sized enterprises (SMEs), this study examines the relationship between macroenvironments and financing decisions of SMEs in the restaurant industry. With a focus on formal and informal credits, the study is grounded in agency theory, which explains how information asymmetry between SMEs and lenders might influence SMEs' financing decisions. Multinomial logistic regressions were used to analyze the data from the Global Entrepreneurship Monitor and the World Bank. The results indicated that the financial infrastructure and tax regulation can significantly increase the odds of choosing formal credits and decrease the odds of choosing informal credits. This study contributes to the literature by assessing the role of information asymmetry and agency theory on restaurant SMEs’ financing decisions. The study also has implications for industry practitioners and policymakers for the financial sustainability and success of SMEs.

Original languageEnglish (US)
Pages (from-to)276-284
Number of pages9
JournalJournal of Hospitality and Tourism Management
Volume45
DOIs
StatePublished - Dec 2020

All Science Journal Classification (ASJC) codes

  • Tourism, Leisure and Hospitality Management

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