Inventories, sales uncertainty, and financial strength

Firm Survival, Uncertainty, and Financial Frictions: Is There a Financial Uncertainty Accelerator?

“…To measure firm uncertainty Leahy and Whited (1996) and Bloom, Bond, and Van Reenen (2001) use volatility of stock prices. 7 The heterogeneity amongst firms in our data allows us to employ a proxy of firm-specific uncertainty using firms' sales in line with previous studies (Caglayan, Maioli, and Mateut 2012;Garcia-Vega, Guariglia, and Spaliara 2012;Lensink, Bo, and Sterken 1999;Morgan, Rime, and Strahan 2004). Sales have been employed 6. γ j is the log of the difference between the integrated baseline hazard evaluated at the end and the beginning of the interval.…”

“…Baum, Caglayan, and Talavera (2010b) use a capital asset pricing model measure to identify the impact of firm uncertainty on investment. as a proxy for firm-specific uncertainty by Lensink, Bo, and Sterken (1999) and Caglayan, Maioli, and Mateut (2012) who test the effect of sales volatility on inventory investment and by Garcia-Vega, Guariglia, and Spaliara (2012) who assess the effect of uncertainty on exporting. Ghosal and Loungani (2000) use profit forecasting to predict future profit in order to assess the impact of uncertainty on investment.…”

“…While there is a large and growing literature on the effects of uncertainty on firms' investment, capital structure, and inventories (see Baum, Stephan, and Talavera 2009;Baum, Caglayan, andTalavera 2010a, 2010b;Caglayan, Maioli, and Mateut 2012;Caglayan and Rashid 2014), less attention has been given to the important dimension of firm survival. First, we investigate the link between uncertainty and firm survival, paying special attention to the most recent financial crisis.…”

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

“…This might offer a relatively well-stocked firm an advantage in a competitive marketplace especially during the times of rising demand. In this regard, carrying inventories almost works as a hedge against sudden demand shock and offers firms some degree of strategic advantage in an uncertain market characterized by demand uncertainties (Caglayan, Maioli et al 2012, Agrawal and Smith 2013, Fullerton, Kennedy et al 2013, Jones and Tuzel 2013, Wu 2013.…”

“…Given the tremendous importance of inventory in firms' competitive and financial lives, a lively literature has emerged through the careful analysis of inventory management and financial performance (Fry and Steele 1995, Gaur, Fisher et al 2005, Capkun, Hameri et al 2009, Kesavan, Gaur et al 2010, Eroglu and Hofer 2011, Caglayan, Maioli et al 2012, Hofer, Eroglu et al 2012, Jones and Tuzel 2013, Kesavan and Mani 2013, Kroes and Manikas 2014. 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.…”