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Inventory decisions under political violence

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  • Custódio, Cláudia
  • Mendes, Bernardo
  • Mendes, Diogo

Abstract

We estimate the effect of violent political conflicts on firm inventory purchase decisions using monthly data of 431 clients of a multinational beverage supplier in Mozambique. Firms reduce inventory purchases by up to 19% in response to conflicts occurring within a 10 km radius. This is observed exclusively among small firms, which reduce their purchases by 28%–32% compared to larger firms. Small firms are also more likely to temporarily or permanently halt their purchases. However, conditional on survival, the effect is short-lived. Our results underscore the disproportionate impact of political violence on small firms, potentially widening the gap between small and large businesses in developing economies.

Suggested Citation

  • Custódio, Cláudia & Mendes, Bernardo & Mendes, Diogo, 2025. "Inventory decisions under political violence," Economics Letters, Elsevier, vol. 247(C).
    • Handle: RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176524006426
    DOI: 10.1016/j.econlet.2024.112158
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    More about this item

    Keywords

    Political violence; Inventory purchases; Working capital investment; Developing countries; Uncertainty;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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