Inventories, sales uncertainty, and financial strength

Mustafa Caglayan (), Sara Maioli and Simona Mateut

Journal of Banking & Finance, 2012, vol. 36, issue 9, 2512-2521

Abstract: We investigate the empirical linkages between sales uncertainty and firms’ inventory investment behavior while controlling for firms’ financial strength. Using large panels of manufacturing firms from several European countries we find that higher sales uncertainty leads to larger stocks of inventories. We also identify an indirect effect of sales uncertainty on inventory accumulation through the financial strength of firms. Our results provide evidence that financial strength mitigates the adverse effects of uncertainty.

Keywords: Inventory investment; Uncertainty; Financial constraints (search for similar items in EconPapers)
JEL-codes: D81 D92 F14 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:36:y:2012:i:9:p:2512-2521

DOI: 10.1016/j.jbankfin.2012.05.006

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