Does Inventory Productivity Predict Future Stock Returns? A Retailing Industry Perspective

Alan, Yasin; Gao, George; Gaur, Vishal

doi:10.1287/mnsc.2014.1897

Cited by 91 publications

(85 citation statements)

References 32 publications

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“…This portfolio‐forming strategy closely follows Alan et al. () and Wu and Birge (). For each year in this sample, we create portfolios formed on August 1 and liquidated on July 31 of the following year .…”

Section: Asset Pricing Implicationsmentioning

confidence: 79%

Effect of Financing Costs and Constraints on Real Investments: The Case of Inventories

Muthuraman

Seshadri

2019

Production and Operations Management

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This paper studies the effects of bank credit availability, trade credit and the capital cost on inventory decisions. There are two competing theories on the effect of bank credit lines on investments. While one (Lins et al. 2010) suggests that the primary role played by undrawn credit is to finance new opportunities, the other (Acharya et al. 2014) suggests that undrawn credit serves primarily as a bank monitored liquidity insurance. We attempt to resolve these two conflict views in the context of inventory investments. Using empirical data, we show that the primary role of undrawn credit depends on the individual firm’s financial status. When a firm is financially constrained, its inventory decisions are linked to the additional bank credit available to the firm—echoing the insurance nature of bank credits. On the other hand, when a firm is financially healthy, two other inventory financing factors play more significant roles than undrawn credits. For financially healthy firms, inventory investments are significantly negatively related to the financial cost of inventory and positively related to the credit offered by suppliers. Additionally, we study the financial crisis of 2007–2008 as a systematic shock in the credit market to identify the effects of a firm’s financial credits. We show that during the financial crisis, the inventory turnover and working capital levels of US retailers were related to the availability of bank credit. However, immediately after the crisis, the evidence demonstrates the positive relationship between firms’ inventory level and the trade credit they are offered.

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Section: Asset Pricing Implicationsmentioning

confidence: 79%

Effect of Financing Costs and Constraints on Real Investments: The Case of Inventories

Muthuraman

Seshadri

2019

Production and Operations Management

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“…Previous research shows that inventory profitability-which measures the firm's ability in effectively and efficiently managing inventory-is the key in producing shareholder wealth [22]. We use inventory turnover (the ratio of net sales over average inventory) to measure the firm's inventory productivity.…”

Section: H3 Textile and Apparel Firms' Ros Decrease After Ems Adoptionmentioning

confidence: 99%

Environmental Management System Adoption and the Operational Performance of Firm in the Textile and Apparel Industry of China

2017

Sustainability

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Abstract:In China, more firms in the textile and apparel industry adopt environmental management systems compared to firms that manufacture other products. It is important to know how the firms' financial and real performances are affected. We study the changes of firms' performance in profitability, sales, and operational efficiency after environmental management system (EMS) adoption using an event study. Based on 22 events of EMS adoption, we found a significant decrease in firms' profitability, sales, and inventory productivity. We explore the reasons which led to the decrease in firm performances. We found that the increase in sample firms' total assets is the major reason. The loss in operational efficiency and flexibility are due to the requirements of the EMS.

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“…Despite the varied nature of the results found over time, a relatively robust consensus seems to be emerging that prudent inventory management does indeed contribute to better financial performance (Gaur, Fisher et al 2005, Modi and Mishra 2011, Hourmes, Dickins et al 2012, Jones and Tuzel 2013, Kesavan and Mani 2013, Wang, Yiu et al 2013, Alan, Gao et al 2014, Basu and Nair 2014, Kroes and Manikas 2014.…”

Section: Theoretical Backgroundmentioning

confidence: 99%

Are Inventories Accretive? Lessons from Inventory and Earnings Relationship in the U.S. Capital Goods Sector

Ray¹

2017

AFR

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This paper presents results documenting the effects of inventories (considered as current assets) on corporate earnings in the US capital goods industry. The results reveal that inventories may have a negative impact on corporate earnings. Therefore, shareholder wealth may be negatively impacted by carrying inventories in the US capital goods sector. Carrying inventories may be crowding out non-inventory assets. Interestingly, higher inventories may lead to depressed overall sales. Depressed overall sales may contribute to further reduction in non-inventory assets. This reduction in non-inventory assets may further result in lower corporate earnings. These results strengthen the need for optimal inventory management and also call for a more nuanced treatment of inventories in the standard accounting literature. These results also strengthen the popular rationale for lean supply chain management. This paper contributes to the literature on the close relationship between operational efficiency and corporate financial outcomes.

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Does Inventory Productivity Predict Future Stock Returns? A Retailing Industry Perspective

Cited by 91 publications

References 32 publications

Effect of Financing Costs and Constraints on Real Investments: The Case of Inventories

Effect of Financing Costs and Constraints on Real Investments: The Case of Inventories

Environmental Management System Adoption and the Operational Performance of Firm in the Textile and Apparel Industry of China

Are Inventories Accretive? Lessons from Inventory and Earnings Relationship in the U.S. Capital Goods Sector

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