Indicating restaurant firms’ financial constraints: a new composite index

Sung Gyun Mun, Soo Cheong (Shawn) Jang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

2 Citations (Scopus)


Purpose: The purpose of this study is to develop an index for financial constraints, specifically for restaurant firms, and to further validate the developed financial constraint index. Design/methodology/approach: This study used logistic regression with a composite criterion based on the dividend payout ratio, KZ index and Cleary index to estimate restaurant firms’ financial constraints. Then, a fixed-effects regression was used to verify the validity of the measurement of restaurant firms’ financial constraints. Findings: A restaurant firm’s operating profit, financial leverage, asset tangibility, sale of fixed assets and percentage change in number of employees are critical indicators for identifying financial constraints. The results indicated that in cases with positive operating cash flows, the effect of operating cash flow on capital investments continuously decreased as restaurant firms’ financial constraints increased. Originality/value: This study is unique in that the specific financial and operational characteristics of restaurant firms were included in the model to determine financial constraint indicators, such as sale of fixed assets and percentage change in number of employees.

Original languageEnglish
Pages (from-to)2014-2031
Number of pages18
JournalInternational Journal of Contemporary Hospitality Management
Issue number4
Publication statusPublished - 8 Apr 2019


  • Cleary index
  • Investment-cash flow sensitivity
  • KZ index
  • Restaurant financial constraint

ASJC Scopus subject areas

  • Tourism, Leisure and Hospitality Management


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