Abstract
Based on the strategic debt argument, this study hypothesizes that short-term debt generally leads a restaurant firm to poor performance due to the lack of a strategic approach from using short-term debt. The study further examines the moderating role of economic conditions in the relationship between short-term debt and firm performance through a pooled regression analysis with heteroscedasticity-consistent standard errors. The data are from publicly traded US restaurant firms for the period 1990–2009. The findings support the research hypothesis that short-term debt in general has a negative impact on the performance of restaurant firms, while the negative effects are significantly reduced during economic downturns.
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