Abnormal inventory and performance in manufacturing companies – evidence from trade credit channels

Journal article


Afrifa, G., Alshehabi, A., Tingbani, I. and Halabi, H. 2020. Abnormal inventory and performance in manufacturing companies – evidence from trade credit channels. Review of Quantitative Finance and Accounting .
AuthorsAfrifa, G., Alshehabi, A., Tingbani, I. and Halabi, H.
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 (UK) 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 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.

KeywordsAbnormal inventory; Firm performance; Trade receivables; Trade payables; Firm risk
Year2020
JournalReview of Quantitative Finance and Accounting
PublisherSpringer
ISSN0924-865X
Digital Object Identifier (DOI)doi:10.1007/s11156-020-00903-y
Official URLhttps://doi.org/10.1007/s11156-020-00903-y
Publication dates
Online30 Jun 2020
Publication process dates
Deposited22 Jun 2020
Accepted11 Jun 2020
Accepted author manuscript
File Access Level
Open
Output statusPublished
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https://repository.canterbury.ac.uk/item/88z21/abnormal-inventory-and-performance-in-manufacturing-companies-evidence-from-trade-credit-channels

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