Moderating effects of capital intensity on the relationship between leverage and financial distress in the U.S. restaurant industry

Research output: Contribution to journalArticle

Abstract

The main purpose of this current study is to examine a moderating effect of capital intensity on the relationship between leverage and financial distress for publicly traded U.S. restaurant firms during the period 1990–2008. Two specific research questions are: (1) Do a firm’s leverage and capital intensity influence the firm’s financial distress? (2) Does a firm’s capital intensity moderate the effect of the firm’s leverage on financial distress? The findings suggest that capital intensity shows a significant and positive moderating effect. While leverage increases the degree of financial distress, and capital intensity decreases the degree, independently, the magnitude of leverage’s worsening impact on financial distress decreases as the level of capital intensity increases.

Original languageEnglish (US)
Pages (from-to)127
Number of pages1
JournalJournal of Hospitality Financial Management
Volume19
Issue number1
DOIs
StatePublished - Jan 1 2011

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industry
effect
Capital intensity
Financial distress
Leverage
Moderating effect
Restaurant industry
firm

All Science Journal Classification (ASJC) codes

  • Finance
  • Tourism, Leisure and Hospitality Management
  • Strategy and Management

Cite this

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abstract = "The main purpose of this current study is to examine a moderating effect of capital intensity on the relationship between leverage and financial distress for publicly traded U.S. restaurant firms during the period 1990–2008. Two specific research questions are: (1) Do a firm’s leverage and capital intensity influence the firm’s financial distress? (2) Does a firm’s capital intensity moderate the effect of the firm’s leverage on financial distress? The findings suggest that capital intensity shows a significant and positive moderating effect. While leverage increases the degree of financial distress, and capital intensity decreases the degree, independently, the magnitude of leverage’s worsening impact on financial distress decreases as the level of capital intensity increases.",
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