Inventory Behaviour: A Comparative Study of UK and Japanese Firms

Jenny Corbett, Donald Hay and Helen Louri

No 1545, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper analyses the determinants of the inventory to assets ratio in panel data sets of Japanese and UK firms in the period 1960–85. The analytical framework sets inventory decisions in the context of decisions by the firm about other assets and liabilities, in contrast to traditional models of inventories. Investment in inventories in Japan is found to be particularly related to sector-specific inflation rates and expected sales, negatively related to expected profits, and not much affected by interest rates. By contrast, UK inventories are generally positively related to profit rates, and respond to short-term interest rates. Once other variables are taken into account, the coefficient on a time trend is positive for Japan (negative for the United Kingdom), which casts some doubt on the widely held view of Japanese innovation in inventory holding.

Keywords: Inventories; Japanese firms; Panel Data; UK firms (search for similar items in EconPapers)
JEL-codes: D21 E22 (search for similar items in EconPapers)
Date: 1997-01
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