Promotional Framing and Firm Valuation in the Restaurant Industry: An Event Study

Abstract

Existing research has demonstrated that sales promotions result in unintended devaluations of firm value. However, this phenomenon remains unstudied in the restaurant industry, leaving restaurant companies with little guidance on how sales promotions affect their organization. This paper investigates the impact of sales promotions—and their framing—on firm value in the restaurant industry. Guided by prospect theory’s loss aversion principle, this study explores whether framing promotions as gains versus reduced losses leads to different outcomes. Using a sample of 1,165 promotion announcements, restaurant promotions were found to increase firm valuation, with reduced-loss framing being more effective. While much of the literature on framing effects has focused on individual decision-making processes, this research demonstrates their broader implications for firm performance and challenges the generalizability of the negative impact of sales promotions on firm value observed in other service industries—particularly hotels—contributing to a deeper understanding of promotional framing in the restaurant industry.