In the context of the propositions, this study has yielded the following results. The first proposition states that "It is believed that financial strategies practiced by high performing restaurant firms are independent of the cyclical fluctuations of the industry cycles.
The results for this proposition are mixed. Specifically, the high performing firms' financial practices regarding investment decisions measured by capital spending, and price earning ratio, and part of financing and dividend decisions measured by market value of common share outstanding are independent of the cyclical fluctuations of the industry cycles. But, their practices regarding dividend decisions measured by the earning per share, investment decision measured by cash flow per share, and financing decisions measured by asset value per share and long term debt level are dependent on the events (Expansion/Contractions) in the Restaurant Industry Cycles.
Conclusively, high performers exercise their capital investment (reflected by capital spending) and equity management (reflected by common shares outstanding and P/E ratio) independently while being less influenced by the industry swings. They exercise, however, their working capital management (reflected by cash flow per share), earning management (reflected by EPS), asset management, and long term debt management quite dependently while being more influenced by the industry swings. Table 2 summarizes these results.
Table 2. Summary of the Kappa Measure of Agreement for the Events (Expansion/Contractions) in the Restaurant Industry Cycles and those of High Performers' Financial Practices
Financial Practices Significant Relationship with the Events in the Industry
Book Value- Asset Yes Same direction .250
P/E No No pattern .059
Long Term Debt Yes Same direction .250
Note: * significant for contraction strategies.
The second proposition states that "It is believed that financial strategies practiced by low performing restaurant firms are independent from the cyclical fluctuations of the industry cycles. The results for this proposition are mixed but the financial practices exercised by the low performing firms are most likely independent from the events in the industry cycle. Although some financial practices are related to the events in the industry cycle, the directions are opposite to the events in the industry cycle. Specifically, for all of the selected financial strategies except common shares outstanding and long-term debt, the low performers practice them independently from the cyclical fluctuations of the industry cycles. Even for common shares outstanding and long-term debt strategies, they practiced their strategies in directions opposite the events (Expansion/Contractions) in the Restaurant Industry Cycles. Table 3 summarizes these results.
Table 3. Summary of the Kappa Measure of Agreement for the Events (Expansion/Contractions) in the Restaurant Industry Cycles and those of Low Performers' Financial Practices
Financial Practices Significant Relationship with the Events in the Industry Cycle?
Direction Kappa level
Capital Spending No No pattern .000
Common Shares
Outstanding Yes Opposite direction -.419
EPS No No pattern .097
Cash Flow Per Share No No pattern -.161
Book Value- Asset No No pattern -.067
P/E No No pattern .059
Long Term Debt Yes Opposite direction -.500
The high and low performing restaurant firms have different patterns of financial practices for the changes of the restaurant industry cycles. The high performers' financial practices of capital spending, market value of common shares outstanding, and price earning ratio are independent of the cyclical fluctuations of the industry cycles. The high performers' financial practices of EPS, CFPS, book value per share, and long term debt management are dependent of the cyclical fluctuations of the industry cycles. The low performers' financial practices of capital spending, EPS, cash flow per share, book value per share, P/E ratio are independent of the cyclical fluctuations of the industry cycles. The low performers' financial practices of market value of common share outstanding and long-term debt are dependent of the cyclical fluctuations of the industry cycles, but they practices their strategies in directions opposite the cyclical fluctuations of the industry cycles.
CONCLUSION
This study was an attempt to gain a possible advantage for the industry cycle study. It examined the financial practices of high and low performing restaurant firms over the industry swings. Industry analysis is the starting point for almost any strategic plan. It is the process through which managers can evaluate the factors within the environment critical for business success (Bernhardt, 1993). To have an effective strategy, competitive intelligence should focus on information related to competitor analysis, environmental trends, and market dynamics (Sammon, Kurland, and Spitalnic, 1984; Cartwritht, Boughton, and Miller, 1995). Analyzing the variety of competitors within the industry can be immensely helpful in predicting future industry conditions (Kight, 1996).
This study found that there are significant differences between high performers' financial practices and low performers'. The patterns of exercising their financial strategy over the industry cycles are different. The results presented in the previous sections will provide significantly different financial strategies of high and low performing restaurant firms. Accordingly, the results can provide managers with the capability to foresee the impact on industry structure and evolution, and to gain founding information for exercising their best financial practices. Analyzing the dynamic relationships and revealing the financial practices of the high performing restaurant firms over the industry cycle will provide competitive advantages in the market.
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