The effect of inventory turnover on financial performance in the US restaurant industry: The moderating role of exposure to commodity price risk

• Published in: Tourism economics : the business and finance of tourism and recreation 2021-11, Vol.27 (7), p.1417-1429
• Main Authors: Park, Eunhye (Olivia), Kim, Woo-Hyuk
• Format: Article
• Language: English
• ISSN: 1354-8166; 2044-0375
• DOI: 10.1177/1354816620923860

Despite the importance of efficiently managing inventory in the restaurant business, evidence of satisfactory inventory turnover in the restaurant industry remains limited. This study examined the relationship between inventory turnover and firm performance as well as the moderating role of exposure to commodity price risk therein. We collected data representing publicly traded US restaurant companies from the Mergent Online’s database for the period from 1999 to 2015. The results indicate there is a positive relationship between inventory turnover and corporate financial performance. Moreover, we found that the interaction effect of exposure to commodity price risk on the relationship between inventory turnover and firms’ profitability. To our knowledge, this is the first study empirically examining the adoption of inventory management by the restaurant industry. Also, these findings provide the importance of effective inventory management based on the specific type of restaurants.