Increased Interest Expense And Management’s Expense Preference Behaviour Of Publicly-Traded Restaurant Firms | Arun Upneja, Michael Dalbor, Nan Hua & Toni Repetti

The purpose of this research was to examine whether or not firms in a lessregulated industry with high competition exhibit expense preference behaviour, originally posited by Williamson (1963) with regards to interest expense. We used the restaurant industry to examine this issue because the restaurant industry is very sensitive to changes in market conditions due to its low profit margin. Interest expenses are exogenously determined and can have a serious impact on the profitability of the restaurant firms. The major finding of this paper shows that ‘other expenses’ increase along with interest expense. Managers do exhibit expense preference behaviour.