ABSTRACT

TThis study investigated how the attributes derived from upper echelon theory explain the franchising of restaurants. In accordance with risk-sharing theory, franchising is regarded as a risk-averse strategic choice rather than a risk-seeking strategic choice from the perspective of franchisor. The sample was derived from publicly traded restaurant companies. The chief executive officer (CEO) was selected as the proxy for the upper echelon. Data was collected from Compustat, Execucomp, and Annual 10K. The study period was 1999–2013 and the number of observation was 204. For the analysis of panel data, this research employed a two-way fixed effect regression model. The results suggested that educational level is negatively associated with the execution of franchising, whereas the value of share ownership has a positive effect on franchising execution. Also, this research showed that female CEOs prefer franchising more than male CEOs. Logistic regression was the main instrument used to account for the decisions of top managers. The results indicated that both share ownership and stock option positively affected the decisions of a limited service restaurant CEO.

KEYWORD

Franchising, Chief Executive Officer, Education level, Gender, Value of share ownership

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