The Impact of Social Media on Restaurant Corporations’ Financial Performance

Abstract

Social media, in the form of online reviews (ORs), has become an essential element for consumers in the restaurant industry, providing reliable and unbiased information based on the dining experiences of other consumers. Social media is not only a crucial phenomenon for the strategy of restaurants, but also for their corporations. However, previous literature has focused on the analysis at the establishment level, rather than at the corporate level, especially when referring to financial performance. The present study tries to verify if social media also affects corporate financial performance. For this, the impact of ORs on advanced measures of financial performance was examined at the corporate level on a sample of 800 restaurants selected from the total population of active restaurants in Europe in 2018. The investigation applied both regression analysis and nonparametric techniques. They demonstrate a positive effect of ORs on financial performance, and a heterogeneous relationship between both variables across the European countries. Restaurants are becoming aware of the implications of this phenomenon since it could provide strategies for sustainable economic development.