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Inventories and sales uncertainty

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Author Info

  • Mustafa Caglayan

    ()
    (Department of Economics, The University of Sheffield)

  • Sara Maioli
  • Simona Mateut

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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File URL: http://www.shef.ac.uk/economics/research/serps/articles/2011_003.html
File Function: First version, 2011
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Bibliographic Info

Paper provided by The University of Sheffield, Department of Economics in its series Working Papers with number 2011003.

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Length: 27 pages
Date of creation: Feb 2011
Date of revision: Feb 2011
Handle: RePEc:shf:wpaper:2011003

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Keywords: inventory investment; uncertainty; financial constraints;

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Cited by:
  1. Alessandra Guariglia & Simona Mateut, . "Political affiliation and trade credit extension by Chinese firms," Discussion Papers 11/12, University of Nottingham, GEP.
  2. Simona Mateut, . "Reverse trade credit - the use of prepayments by French firms," Discussion Papers 11/12, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).

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