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Investment in Inventories: An Empirical Microeconomic Model of Firm Behaviour

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  • Hay, D.
  • Louri, H.

Abstract

Inventory investment is one part of a decision nexus addressed by the firm including physical investment, finance, and trade credit. The analysis presented in this paper makes this explicit, drawing on portfolio theory to model balance sheet items. The model is tested for samples of U.K.-quoted companies for the period 1960-85, and is shown to perform better than standard stock-adjustment equations. The equations indicate different behavioral responses between a sample of large growth-oriented companies and a sample of smaller stable companies. There is also evidence that large company behavior changed in the turbulent economic conditions of the 1970s. Copyright 1994 by Royal Economic Society.
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Suggested Citation

  • Hay, D. & Louri, H., 1991. "Investment in Inventories: An Empirical Microeconomic Model of Firm Behaviour," Economics Series Working Papers 99123, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:99123
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    Cited by:

    1. Allen, Donald S., 1997. "A multi-sector inventory model," Journal of Economic Behavior & Organization, Elsevier, vol. 32(1), pages 55-87, January.
    2. Li, Han & Li, Zhigang, 2013. "Road investments and inventory reduction: Firm level evidence from China," Journal of Urban Economics, Elsevier, vol. 76(C), pages 43-52.
    3. Louri, Helen, 1996. "Inventory investment in Greek manufacturing industry: Effects from participation in the European market," International Journal of Production Economics, Elsevier, vol. 45(1-3), pages 47-54, August.
    4. Chuantao Cui & Leona Shao-Zhi Li, 2019. "High-speed rail and inventory reduction: firm-level evidence from China," Applied Economics, Taylor & Francis Journals, vol. 51(25), pages 2715-2730, May.
    5. Josef Brada & Arthur King & Chia-Ying Ma, 2010. "Investing in Turbulent Times: The Investment Behavior of Polish Firms in the Early Transition," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 17(1), pages 1-21, May.
    6. Dimelis, Sophia P. & Lyriotaki, Maria-Niki, 2007. "Inventory investment and foreign ownership in Greek manufacturing firms," International Journal of Production Economics, Elsevier, vol. 108(1-2), pages 8-14, July.
    7. Huang, Yingshan & Ouyang, Haiqin & Pan, Weihua & He, Xiaogang, 2023. "Role of high-speed rail services in China’s economic recovery: Evidence from manufacturing firm inventories," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 389-405.
    8. He, Xin & Xu, Xinwei & Shen, Yu, 2023. "How climate change affects enterprise inventory management —— From the perspective of regional traffic," Journal of Business Research, Elsevier, vol. 162(C).

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    Keywords

    investments ; human resources;

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