Explaining the asset growth anomaly in the restaurant industry: Motivations and consequences

Sung Gyun Mun, Soo Cheong Jang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

2 Citations (Scopus)


Many business leaders have the tendency to vigorously pursue rapid firm growth, but this focus is often criticized as problematic in terms of operating performance. Accordingly, this study suggested that the asset growth anomaly is an inevitable phenomenon for growing restaurant firms: operating profitability increases as assets grow to the optimum level and then decreases after this level. However, most restaurant firms invest their capital below the optimum level, and only a small number of restaurant firms increase their assets too rapidly. Further, the amount of a chief executive officer’s (CEO’s) bonus payments motivates their investments in asset growth, while the amount of stock options increases the probability of overinvestment practices in restaurant firms. Therefore, even though overinvestment practices are not apparent in most restaurant firms, an appropriate proportion of equity-based incentives is beneficial to prevent overinvestment practices by a few restaurant firms to avoid negatively impacting shareholders’ wealth.

Original languageEnglish
JournalTourism Economics
Publication statusPublished - 2 Sept 2020


  • asset growth
  • asset turnover
  • CEO compensation
  • investment-return
  • overinvestment
  • return on asset

ASJC Scopus subject areas

  • Geography, Planning and Development
  • Tourism, Leisure and Hospitality Management


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