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Inventories and sales uncertainty

  • Mustafa Caglayan


    (Department of Economics, The University of Sheffield)

  • Sara Maioli
  • Simona Mateut

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 Function: First version, 2011
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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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