Abnormal inventory and performance in manufacturing companies: evidence from the trade credit channel
Abnormal inventory and performance in manufacturing companies: evidence from the trade credit channel
This paper examines the value of abnormal inventory and the channels through which firms decrease abnormally high inventory or increase abnormally low inventory for a sample of 976 United Kingdom manufacturing firms over the period from 2006 to 2015. Using GMM regressions, the results show that (i) an optimal inventory policy exists; and (ii) firms that are able to converge at this optimal inventory level by either decreasing abnormally high inventory or increasing abnormally low inventory to improve operational and stock performance. Importantly, the results show that trade receivables and trade payables are the channels through which firms achieve efficient inventory management.
Abnormal inventory, Firm performance, Firm risk, Trade payables, Trade receivables
581–617
Afrifa, Godfred Adjapong
956c7235-c03d-46cf-83d2-f08392aa3ba2
Alshehabi, Ahmad
df429384-77a3-4c65-b0a2-b98c83c885d7
Tingbani, Ishmael
410bbf8b-14ee-4bb6-af33-f27028c90a35
Halabi, Hussein
abf2b13e-e1fe-4fe0-8beb-9a48059d8cfa
February 2021
Afrifa, Godfred Adjapong
956c7235-c03d-46cf-83d2-f08392aa3ba2
Alshehabi, Ahmad
df429384-77a3-4c65-b0a2-b98c83c885d7
Tingbani, Ishmael
410bbf8b-14ee-4bb6-af33-f27028c90a35
Halabi, Hussein
abf2b13e-e1fe-4fe0-8beb-9a48059d8cfa
Afrifa, Godfred Adjapong, Alshehabi, Ahmad, Tingbani, Ishmael and Halabi, Hussein
(2021)
Abnormal inventory and performance in manufacturing companies: evidence from the trade credit channel.
Review of Quantitative Finance and Accounting, 56, .
(doi:10.1007/s11156-020-00903-y).
Abstract
This paper examines the value of abnormal inventory and the channels through which firms decrease abnormally high inventory or increase abnormally low inventory for a sample of 976 United Kingdom manufacturing firms over the period from 2006 to 2015. Using GMM regressions, the results show that (i) an optimal inventory policy exists; and (ii) firms that are able to converge at this optimal inventory level by either decreasing abnormally high inventory or increasing abnormally low inventory to improve operational and stock performance. Importantly, the results show that trade receivables and trade payables are the channels through which firms achieve efficient inventory management.
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Abnormal inventory and performance
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e-pub ahead of print date: 30 June 2020
Published date: February 2021
Keywords:
Abnormal inventory, Firm performance, Firm risk, Trade payables, Trade receivables
Identifiers
Local EPrints ID: 443954
URI: http://eprints.soton.ac.uk/id/eprint/443954
ISSN: 0924-865X
PURE UUID: 60d7f3e8-9016-4c37-b0e0-e01d2645ead8
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Date deposited: 17 Sep 2020 16:41
Last modified: 17 Mar 2024 04:13
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Contributors
Author:
Godfred Adjapong Afrifa
Author:
Ahmad Alshehabi
Author:
Ishmael Tingbani
Author:
Hussein Halabi
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