Inventory decisions under political violence

Cláudia Custódio, Bernardo Mendes and Diogo Mendes

Economics Letters, 2025, vol. 247, issue C

Abstract: We estimate the effect of violent political conflicts on firm inventory purchase decisions using monthly data of 431 clients of a multinational beverage supplier in Mozambique. Firms reduce inventory purchases by up to 19% in response to conflicts occurring within a 10 km radius. This is observed exclusively among small firms, which reduce their purchases by 28%–32% compared to larger firms. Small firms are also more likely to temporarily or permanently halt their purchases. However, conditional on survival, the effect is short-lived. Our results underscore the disproportionate impact of political violence on small firms, potentially widening the gap between small and large businesses in developing economies.

Keywords: Political violence; Inventory purchases; Working capital investment; Developing countries; Uncertainty (search for similar items in EconPapers)
JEL-codes: D22 D74 G31 I32 O12 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176524006426

DOI: 10.1016/j.econlet.2024.112158

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