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Who makes acquisitions? An empirical investigation of restaurant firms

Author

Listed:
  • Tarik Dogru

    (7823Florida State University, USA)

  • Ozgur Ozdemir

    (14722University of Nevada, USA)

  • Murat Kizildag

    (6243University of Central Florida, USA)

  • Aysa Ipek Erdogan

    (52949Bogazici University, Turkey)

Abstract

The purpose of this study is to examine the financial and operational factors that explain acquisition decisions in restaurant firms. We analyze the effects of franchising, dividends, leverage, Tobin’s Q , total assets, sales growth, and cash flows on restaurant firms’ acquisition decisions. The findings show that firms with high growth prospects and excess cash flows (i.e. small firms and franchising restaurant firms) are more likely to make acquisitions than their counterparts. Furthermore, firms with higher dividend payouts are less likely to engage in acquisition deals due to lack of cash. Shareholders perceive acquisitions to be value-decreasing only if large restaurant firms (not necessarily franchising) make acquisitions, while shareholders perceive acquisitions to be value-increasing when franchising firms make acquisitions. The findings provide partial support for the postulations of overinvestment and underinvestment theories. Theoretical and practical implications are discussed.

Suggested Citation

  • Tarik Dogru & Ozgur Ozdemir & Murat Kizildag & Aysa Ipek Erdogan, 2021. "Who makes acquisitions? An empirical investigation of restaurant firms," Tourism Economics, , vol. 27(1), pages 260-268, February.
    • Handle: RePEc:sae:toueco:v:27:y:2021:i:1:p:260-268
    DOI: 10.1177/1354816619875849
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    References listed on IDEAS

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    3. Morck, Randall & Shleifer, Andrei & Vishny, Robert W, 1990. "Do Managerial Objectives Drive Bad Acquisitions?," Journal of Finance, American Finance Association, vol. 45(1), pages 31-48, March.
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    7. Murat Kizildag & Ozgur Ozdemir, 2017. "Underlying factors of ups and downs in financial leverage overtime," Tourism Economics, , vol. 23(6), pages 1321-1342, September.
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    Cited by:

    1. Nicolau, Juan Luis & Sharma, Abhinav, 2022. "A review of research into drivers of firm value through event studies in tourism and hospitality: Launching the Annals of Tourism Research curated collection on drivers of firm value through event stu," Annals of Tourism Research, Elsevier, vol. 95(C).

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