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Abnormal inventory and performance in manufacturing companies: evidence from the trade credit channel

Afrifa, Godfred Adjapong, Alshehabi, Ahmad, Tingbani, Ishmael, Halabi, Hussein (2020) Abnormal inventory and performance in manufacturing companies: evidence from the trade credit channel. Review of Quantitative Finance and Accounting, . ISSN 0924-865X. (doi:10.1007/s11156-020-00903-y) (KAR id:82208)

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Official URL:
https://doi.org/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.

Item Type: Article
DOI/Identification number: 10.1007/s11156-020-00903-y
Uncontrolled keywords: Abnormal inventory, Firm performance, Trade receivables, Trade payables, Firm risk
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Depositing User: Godfred Afrifa
Date Deposited: 23 Jul 2020 12:30 UTC
Last Modified: 06 Oct 2021 14:25 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/82208 (The current URI for this page, for reference purposes)
Afrifa, Godfred Adjapong: https://orcid.org/0000-0003-3670-8812
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