Inventories,sales uncertainty,and financial strength |
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Authors: | Mustafa Caglayan Sara Maioli Simona Mateut |
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Institution: | 1. Department of Economics, University of Sheffield, 9 Mappin Street, Sheffield S1 4DT, UK;2. Newcastle University Business School, Barrack Road, Newcastle Upon Tyne, NE1 4SE, UK;3. University of Nottingham, Business School, Jubilee Campus, Wollaton Road, Nottingham, NG8 1BB, UK |
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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. |
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Keywords: | Inventory investment Uncertainty Financial constraints |
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