Description
Title: Dynamics of Restaurant Profitability and Growth: The Case of Norway
Abstract: Overseas, the restaurant business is quite comparable. It is a labor-intensive sector with a significant impact on employment and tourism. It primarily consists of numerous small businesses that are dispersed across the region. Numerous studies have examined this industry. The dynamics of growth and profit have, however, only been briefly discussed in a few articles. This study uses publicly available public panel data from 2010 to 2019 to apply the law of proportionate effect (LPE) and the theory of profit persistence to Norwegian restaurants. 866 restaurants are included in the sample. One significant finding is that Gibrat’s law (LPE), which states that growth is not independent of firm size, does not appear to hold. Small businesses are more profitable and grow more quickly than the competition. The restaurant business exhibits some persistence of profit. Working capital is positively correlated with profitability while debt ratios are negatively correlated. The study demonstrates that size and profit can be traded off. These results are beneficial to both the industry and other people (public planning, lenders, and more).
Keywords: restaurant industry; GMM estimator; panel data; profit persistence; Gibrat’s law; law of proportionate effect (LPE); Norway
Paper Quality: SCOPUS / Web of Science Level Research Paper
Subject: Economics
Writer Experience: 20+ Years
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