Working capital, cash holding, and profitability of restaurant firms

Sung Gyun Mun, Soo Cheong Shawn Jang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

47 Citations (Scopus)

Abstract

Efficient working capital management is becoming important for restaurant firms coping with weak financial conditions and increased economic uncertainty. This study investigates the impact of restaurant firms' working capital on their profitability. We further examine the effects of firms' cash levels on the relationship between working capital and profitability. The findings ascertain a strong inverted U-shape relationship between working capital and a firm's profitability, which indicates the existence of an optimal working capital level for restaurant firms. This study also reveals that a firm's cash level is an important factor for efficient working capital management. The results suggest that interactive effects exist among working capital, cash levels, and profitability. Thus, restaurant managers should consider these different roles and impacts when developing an efficient working capital management strategy. Detailed results and implications are presented in the main body of this paper.
Original languageEnglish
Pages (from-to)1-11
Number of pages11
JournalInternational Journal of Hospitality Management
Volume48
DOIs
Publication statusPublished - 1 Jul 2015
Externally publishedYes

Keywords

  • Cash conversion cycle
  • Cash holdings
  • Profitability
  • Restaurant firms
  • Working capital management

ASJC Scopus subject areas

  • Tourism, Leisure and Hospitality Management
  • Strategy and Management

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