INVENTORIES AND FIXED INVESTMENT

Hong Bo ()

Australian Economic Papers, 2004, vol. 43, issue 4, 406-421

Abstract: We model fixed investment incorporating the inventory decision of the firm. Using Dutch listed nonfinancial firms during 1985–2000, we find that the inventory stock is negatively associated with fixed investment. The results suggest that the inventory stock may be used by the firm as a buffer in response to unexpectedly high demand. In addition, the firm may hold the inventory stock as a contingency substitute for the financial source of fixed investment.

Date: 2004
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https://doi.org/10.1111/j.1467-8454.2004.00236.x

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