“درک شرکت های رستورانی” تامین مالی بدهی سهام ‘Understanding restaurant firms’ debt-equity financing

1. Introduction Modern corporate finance literature often cites two main theories to explain firms’ financial decisions: trade-off theory and pecking order theory (Myers, 1984; Myers & Majluf, 1984). In traditional corporate finance models, firms determine whether or not to use external financing, and if so which type (e.g., either debt or equity), by weighing the benefits and costs of debt financing. In contrast, pecking order theory suggests that due to information asymmetry firms prefer to use retained earnings first, followed by debt, and then stocks. Therefore, if external funding opportunities are available firms will use debt in order to cover internal cash flow deficits until they hit debt capacity (Shyam-Sunder & Myers, 1999). Consequently, based on pecking order theory it is reasonable to expect that firms issuing stock have greater financial leverage than firms issuing debt. However, according to an empirical study by Lemmon and Zender (2010), firms issuing stock have less financial leverage than firms issuing debt. Further, Shyam-Sunder and Myers (1999) and Myers (2001) revealed that U.S. firms used more equity financing than debt financing between 1980 and 1990, which also casts doubt on the general principle of the pecking order theory. Additionally, restaurant managers have explicitly stated that the primary motivation of IPOs (e.g., Bloomin’ Brands Inc., CKE Inc., Chanticleer Holdings Inc., Noodles & Company, and El Pollo Loco Holdings Inc. during the period of 2011 to 2013) is to pay down existing debt (NRN, 2014) rather than invest in growth. Under pecking order theory, this is not a reasonable financial behavior since equity financing is more expensive than debt financing unless a firm has exhausted its debt capacity. If this is the case, then how can we explain the discrepancy between restaurant firms’ theoretical and empirical financial practices? Despite comprehensive theoretical debates on the determinants of financial choices, previous studies have not fully captured the important role of equity financing, especially in firms with limited access to financial markets. This is particularly important given that restaurant firms frequently use equity financing (Jang & Kim, 2009; Jang & Ryu, 2006). Some even use both debt and equity financing simultaneously rather than a unilateral financing option, which also cannot be clearly explained by either the trade-off or pecking order theory. Why do restaurant firms use costly equity financing before reaching their debt capacity, especially firms with little financial leverage? What circumstances impede restaurant firms from obtaining sufficient debt and force them to seek supplementary equity financing?