Inventory management under financial distress: an empirical analysis

Steinker, Sebastian; Pesch, Mario; Hoberg, Kai

doi:10.1080/00207543.2016.1157273

Cited by 27 publications

(44 citation statements)

References 43 publications

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“…Examples of such relationships include production flexibility and the number of dealerships in the case of the automotive industry (Cachon and Olivares, 2010); the time relative to the fiscal year end in publicly traded firms (Lai, 2008; Hoberg et al, 2017); and sales characteristics, gross margins, and capital intensity in the retail industry (Gaur et al, 2005). We refer the reader to Eroglu and Hofer (2011), Steinker et al (2016), and Bendig et al (2018) for recent reviews of different aspects of the empirical inventory literature and focus on the studies that are most immediately relevant to our topic.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Carpenter et al (1998) find evidence that firms' inventory investment decreases when they face cash flow constraints. Steinker et al (2016) analyze the inventory behavior of firms in financial distress and show that firms with lower liquidity reduce inventories to avoid bankruptcy. Udenio et al (2015) observe this behavior for a chemical company that was affected by the financial crisis.…”

Section: Hypotheses Developmentmentioning

confidence: 99%

“…Financial health is typically measured while accounting for multiple dimensions to provide a holistic perspective. The contemporary operations literature frequently quantifies financial health through the Altman's Z‐score when analyzing the impact of inventory decisions (e.g., Swamidass, 2007; Steinker et al, 2016).…”

Section: Hypotheses Developmentmentioning

confidence: 99%

“…This finding is consistent with, and expands upon, the empirical study of Eroglu and Hofer (2011) that found an ‘inverted U’ relationship between inventory leanness and firm performance in numerous industries. Our results suggest that using inventory reductions to increase liquidity in the short term (Udenio et al, 2015; Steinker et al, 2016) needs to be gauged carefully against the tradeoffs between different dimensions of long‐term financial performance. Our results, however, also indicate that the marginal effect of overages (underages) is conditional on the level of underage (overage) a firm exhibits during the period of analysis, i.e., the marginal effect of overage (underage) on financial performance is larger for firms with higher underages (overages).…”

Section: Introductionmentioning

confidence: 97%

“…These observations motivate our research. Given the importance of inventory management capabilities in crisis situations (Steinker et al, 2016), our objective is to investigate inventory agility in response to demand shocks. With this study, we address three research questions: (i) How did firms react to the significant decline in demand and align their inventory to the new situation?, (ii) What are the antecedents of inventory agility during the crisis?…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Inventory agility upon demand shocks: Empirical evidence from the financial crisis

Udenio

Hoberg

Fransoo

2018

J of Ops Management

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The objective of this paper is to identify antecedents of inventory agility (i.e., the capability to quickly adapt inventories to changes in demand) upon demand shocks based on the awareness‐motivation‐capability (AMC) framework and to explore the link between inventory agility and financial performance. We introduce an empirical measure of inventory agility based on the deviation of relative inventories (i.e., inventory days) from their forecasted values. We hypothesize that firms with higher awareness, motivation, and capabilities are associated with higher inventory agility in the presence of demand shocks. We define two empirical measures for each of the three dimensions of the AMC framework in the context of inventory agility: awareness (i.e., market orientation and technology orientation), motivation (i.e., gross margin and liquidity), and capabilities (i.e., inventory management capability and resource availability). In addition, we incorporate the constraining factor model (CFM) into the AMC framework, thus allowing for complementarity among the different measures. In this view, the influence of each of the measures on inventory agility varies according to which of the measures is the constraining factor for a given firm. The 2008 financial crisis may have tested firms' inventory agility more than any other crisis since the Great Depression, as an unprecedented collapse of demand coincided with a reduction in credit availability. Therefore, for our analysis, we use firm‐level empirical data from 1263 public U.S. manufacturing firms for the 2005–2011 period. We find that firms' motivation and capabilities are key factors associated with inventory agility. Through the CFM, we show that identifying the constraining factors leads to a more refined understanding of the moderating effects of the antecedents of inventory agility. In a separate analysis, we find that inventory agility is positively associated with a number of financial performance metrics during crisis periods. We distinguish between inventory underages and overages and find that, during the crisis, they are both associated with lower financial performance. Furthermore, we find evidence that higher underages (overages) magnify the effect of overages (underages). Among other managerial insights, our findings suggest that the use of inventory reductions as a quick way to increase liquidity must be gauged against their potential impact on other aspects of financial performance.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Hypotheses Developmentmentioning

confidence: 99%

Section: Hypotheses Developmentmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 97%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Inventory agility upon demand shocks: Empirical evidence from the financial crisis

Udenio

Hoberg

Fransoo

2018

J of Ops Management

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The impact of a firm's corporate social responsibility on firm–supplier relationships: The effect of secondary stakeholder CSR on inventory days

Groening

Ngoh

Luchs

2022

Corp Soc Responsibility Env

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Well-known benefits of corporate social responsibility (CSR) are goodwill and trust.Typically, research states that if a firm engages in CSR activities that benefit stakeholder X, then stakeholder X will reciprocate with higher levels of trust. We advance this line of research by examining whether CSR activities directed to stakeholder X increase the levels of trust between the firm and a different stakeholder, Y. Specifically, we examine the consequences of CSR actions that a firm directs toward non-supplier stakeholders on the firm-supplier relationship. We argue that a firm's secondary stakeholder CSR (e.g., community and environment) creates trust and goodwill with third parties (i.e., suppliers) that manifests in reduced inventory days. We use a data set comprising 27,551 firm-year observations and find that secondary CSR is associated with decreased inventory days in more complex (more heterogenous and competitive), munificent (growing), dynamic (unpredictable), and socially irresponsible (e.g., gambling and tobacco) business environments.

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Turnaround, Decline, and Strategic Posture of SME: Empirical Evidence

Oliveira Saraiva,

Ferreira,

Alves

2024

J Knowl Econ

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This study evaluates how the environment, the strategic posture, and the organizational structure contribute to the decline and performance of small- and medium-sized enterprises (SME). Based on a sample of SME and through recourse to Altman’s Z-score model, we evaluate the situation of companies that declare they are facing difficulties in conjunction with their financial performance. The results demonstrate that a strategic entrepreneurial posture and an organic organizational structure, characterized by dynamism, decentralization, and control over the objectives, positively contribute to the performance of companies and prevent their bankruptcy. Our study findings contribute to a better understanding of the factors that lead to SME decline and failure while highlighting the factors that improve their performance levels. The study also reflects on the turnaround process and the redefinition of strategies, new ways of planning, internal organization, and management control.

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Inventory management under financial distress: an empirical analysis

Cited by 27 publications

References 43 publications

Inventory agility upon demand shocks: Empirical evidence from the financial crisis

Inventory agility upon demand shocks: Empirical evidence from the financial crisis

The impact of a firm's corporate social responsibility on firm–supplier relationships: The effect of secondary stakeholder CSR on inventory days

Turnaround, Decline, and Strategic Posture of SME: Empirical Evidence

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