INFORMATION ASYMMETRY AND ITS EFFECT IN THE RESTAURANT INDUSTRY

In the restaurant industry, information gap between inside management and outside stakeholders could be considerable due to analyst’ lack of interest in the restaurant industry and restaurant firms’ high intangible asset and scant corporate payout. Given the possible seriousness of information asymmetry in the restaurant industry, the subject of information asymmetry could bear great importance in the restaurant industry. Nevertheless, information asymmetry has never been the subject of study in the restaurant industry, not to mention the hospitality industry generally. With this research gap in mind, this study conducted extensive research to understand the various implications of information asymmetry in the restaurant industry. The first objective of this study was to examine the magnitude of information asymmetry in the restaurant industry. This study demonstrated the seriousness of information asymmetry in the restaurant industry by showing that the size of information asymmetry within the restaurant industry is greater than that of other services industries (i.e., utility, REIT, and airline industries). The second objective of this study was to examine the unique determinants of information asymmetry in the restaurant industry. The results of this study showed that in the restaurant industry, information asymmetry widens as the size of accruals increases. Additionally, information asymmetry was found to be smaller for franchise restaurants than for non-franchise restaurants. The third objective of this study was to investigate the impact of information asymmetry on some managerial behaviors in the restaurant industry. This study showed that in the restaurant industry, information asymmetry leads to a manager’s reduced corporate payout and increased investment inefficiency. The last objective of this study was to examine the impact of information asymmetry on firm value in the restaurant industry. By demonstrating a curvilinear relationship between information asymmetry and firm value, this study showed that there exists not only a negative impact of information asymmetry but also a positive impact of information asymmetry on firm value in the restaurant industry. Furthermore, this study showed that the positive impact of information asymmetry on firm value is more prominent for high-leveraged and mature firms than their counterpart groups. This study’s results not only help understand the characteristics of information asymmetry in the restaurant industry but also introduce a new window for understanding managerial behaviors and firm value in the restaurant industry.