Understanding the volatility of firm performance associated with corporate misconduct in the restaurant industry

Abstract

Restaurant operators are often struggling to establish a robust governance and internal control system that protects against potential corporate wrongdoing. Whether purposely or unintentionally, restaurant firms’ engagement in corporate misconduct can increase the volatility of their financial performance and harm the interests of stakeholders. Thus, this study investigates how a restaurant firm’s engagement in a wide range of corporate misconduct affects their performance volatility and the moderating effect of the internationalization strategy on this main relationship based on the stakeholder theory. The findings of this study show that various acts of corporate misconduct by restaurant firms increase the volatility of their financial performance. In addition, restaurant firms with a high level of internationalization are more likely to receive greater volatility in their financial performance when corporate misconduct is caught and discovered by the stakeholder groups.