During the recent and ongoing economic turmoil, countless businesses have been facing financial distress and many have filed for bankruptcy. This issue is especially critical for the restaurant industry due to restaurants' sensitivity to economic fluctuations. Therefore, the purpose of this study is to examine the financial distress issue in the U.S. restaurant industry. In particular, the study examines a moderating effect of capital intensity on the relationship between a firm's leverage and degree of financial distress. The dataset includes publicly traded U.S. restaurant firms during the period 1990-2008. The study measures the degree of financial distress by modified Z-scores, and findings suggest a positive moderating effect of capital intensity on the relationship between leverage and financial distress.
All Science Journal Classification (ASJC) codes
- Tourism, Leisure and Hospitality Management
- Strategy and Management