%0 Journal Article
%T Cash regimes and the franchise system: An extension of the marginal value of cash
%A Kwangmin Park
%A SooCheong (Shawn) Jang
%J Tourism Economics
%@ 2044-0375
%D 2019
%R 10.1177/1354816618797865
%X The main purpose of this study is to examine the marginal value of cash in franchise restaurants by extending Faulkender and Wang¡¯s three cash regimes into the franchise framework. Utilizing theoretical underpinnings from prior studies, this study attempted to verify that franchising is a quasi-debt financing tool for restaurant firms. The sample used in this study was retrieved from Compustat and 10-K annual reports from 1980 to 2015. The results of this study revealed that ¡°raising cash¡± and ¡°servicing debt¡± regimes are common in the restaurant industry. This study also found that shareholders place a lower value on the marginal value of cash for franchise restaurants compared with non-franchise restaurants. Furthermore, the market value of additional cash for franchise restaurants decreased when the proportion of franchise sales increased. This study confirmed Norton¡¯s argument that franchising funds are not simply cheap capital. Furthermore, this study found that the value of cash holdings decreased for franchise restaurants based on the level of franchising operations
%K cash holdings
%K cash regimes
%K franchise system
%K marginal value of cash
%U https://journals.sagepub.com/doi/full/10.1177/1354816618797865