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

Sujin Song, Sungbeen Park, Seoki Lee

Research output: Contribution to journalArticle

12 Citations (Scopus)

Abstract

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.

Original languageEnglish (US)
Pages (from-to)107-118
Number of pages12
JournalInternational Journal of Hospitality Management
Volume61
DOIs
StatePublished - Feb 1 2017

Fingerprint

Firm risk
Restaurants
Geographic diversification
International diversification
firm
market
Diversification
Nonlinear relationships
effect
Firm value
Modern portfolio theory
Firm performance
Corporate diversification
Hospitality
Herfindahl index
Risk reduction
risk reduction
index

All Science Journal Classification (ASJC) codes

  • Tourism, Leisure and Hospitality Management
  • Strategy and Management

Cite this

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Impacts of geographic diversification on restaurant firms’ risk : Domestic vs. international diversification. / Song, Sujin; Park, Sungbeen; Lee, Seoki.

In: International Journal of Hospitality Management, Vol. 61, 01.02.2017, p. 107-118.

Research output: Contribution to journalArticle

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