Determinants of Financial Structure in Korean Restaurant Industry

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This study attempts to analyze the determinants of financial structure for Korean restaurant firms. Firm leverage is measured at three levels with different maturities, namely total debt, long-term debt and short-term debt, using five major determinants from a wide variety of financial structure studies. These determinants are firm size, tangibility level, profitability, growth opportunities, and operating risk (earnings volatility). The results show that some factors are highly significant with firm leverage. Overall, total leverage decreases with profitability and growth opportunities in Korean restaurant firms. Significantly positive relationship was found between long-term debt and growth opportunities. For short-term debt, profitability was the most important determinant as higher profitability led to significantly lower short-term borrowings.