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

Afrifa, Godfred Adjapong, Alshehabi, Ahmad, Tingbani, Ishmael and Halabi, Hussein 2020. Abnormal inventory and performance in manufacturing companies: evidence from the trade credit channel. Review of Quantitative Finance and Accounting 56 (2) , pp. 581-617. 10.1007/s11156-020-00903-y

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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
Date Type:	Published Online
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Springer
ISSN:	0924-865X
Date of First Compliant Deposit:	12 January 2023
Last Modified:	03 May 2023 01:49
URI:	https://orca.cardiff.ac.uk/id/eprint/154165

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