Impact of the COVID-19 pandemic: Evidence from the U.S. restaurant industry. (January 2021)

• Record Type: Journal Article
• Authors: Song, Hyoung Ju; Yeon, Jihwan; Lee, Seoki
• Is Part Of: International journal of hospitality management. Volume 92(2021)
• Publication Date: 2021-01
• Subjects: COVID-19 -- Stock returns -- Restaurants -- Financial conditions -- Corporate strategies -- Ownership structure; Hotel management -- Periodicals; Restaurant management -- Periodicals; Food service management -- Periodicals; Hôtels -- Gestion -- Périodiques; Restaurants -- Gestion -- Périodiques; Services alimentaires -- Gestion -- Périodiques; Food service management; Hotel management; Restaurant management; Periodicals; 647.94
• DOI: 10.1016/j.ijhm.2020.102702
• Languages: English
• ISSNs: 0278-4319

Abstract

Highlights: This study examines the relationship between various pre-pandemic firm characteristics and stock price reactions to COVID-19. This study employed GEE for analyses using STATA 15.1. Restaurant firms with larger size, more leverage, more cash flows, less ROA, and more internationalization are more resilient to stock declines. Dividend, franchising, institutional ownership, and managerial ownership did not show a significant moderating effect. This study contributes to the literature by providing insights into drivers of restaurant firm's stock returns during the COVID-19 shock. Abstract: The current study examines how the effect of COVID-19 on U.S. restaurant firms' stock returns varies according to the firms' pre-pandemic characteristics by employing three firm-level dimensions (financial conditions, corporate strategies, and ownership structure). Employing 795 firm-year observations obtained from annual reports and other databases, this study found that restaurant firms with past characteristics of larger size, more leverage, more cash flows, less ROA, and more internationalization are more resilient to stock declines reacting to COVID-19 than otherwise similar firms. Whereas, dividend, franchising, institutional ownership, and managerial ownership did not show any significant moderating effect on the relationship between COVID-19 and stock returns. This study sheds light on the research topic by providing insights into drivers of restaurant firm's stock returns during the COVID-19 shock. Future studies can employ the variables and method used in the current study to extend the understanding of the issue.