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Production Smoothing, Firms' Heterogeneity, and Financial Constraints: Evidence from a Panel of UK Firms

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  • Guariglia, Alessandra
  • Schiantarelli, Fabio

Abstract

In this paper, the authors provide an empirical analysis of heterogeneity in firms' inventory behavior using a panel of U.K. manufacturing firms. They first investigate how the relative variance of production and sales differs across firms. The authors then use variants of the linear quadratic inventory model in order to analyze potential heterogeneity in firms' incentives to smooth production. The results suggest that incentives to smooth production are not prevalent. This conclusion also holds when firms are partitioned according to whether they are more or less likely to face financial constraints. Copyright 1998 by Royal Economic Society.

Suggested Citation

  • Guariglia, Alessandra & Schiantarelli, Fabio, 1998. "Production Smoothing, Firms' Heterogeneity, and Financial Constraints: Evidence from a Panel of UK Firms," Oxford Economic Papers, Oxford University Press, vol. 50(1), pages 63-78, January.
  • Handle: RePEc:oup:oxecpp:v:50:y:1998:i:1:p:63-78
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    Cited by:

    1. Ghosh, Saibal & Ghosh, Saurabh, 2006. "Does Monetary Policy Affect A Firm’s Investment Through Leverage? Micro Evidence for India," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 59(1), pages 17-31.
    2. Andrew Benito, 2002. "Financial pressure, monetary policy effects and inventory adjustment by UK and Spanish firms," Working Papers 0226, Banco de España;Working Papers Homepage.
    3. Guariglia, Alessandra, 1999. "An analysis of the inventory behavior in a q-theoretic framework," International Journal of Production Economics, Elsevier, vol. 58(2), pages 131-146, January.
    4. Quader, Syed Manzur, 2017. "Differential effect of liquidity constraints on firm growth," Review of Financial Economics, Elsevier, vol. 32(C), pages 20-29.

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