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http://dx.doi.org/10.13106/jafeb.2022.vol9.no1.0121

Nexus Between Inventory Volatility and Capital Investment: Evidence from Selected Asian Economies  

SUBHANI, Bilal Haider (School of Economics and Finance, Xi'an Jiaotong University)
ASHFAQ, Khurram (College of Commerce, Government College University)
KHAN, Muhammad Asif (Department of Commerce, University of Kotli Azad Jammu and Kashmir, Department of Business Management, University of Johannesburg)
MEYER, Natanya (Department of Business Management, DHET-NRF SARChI Entrepreneurship Education, University of Johannesburg)
FAROOQ, Umar (School of Economics and Finance, Xi'an Jiaotong University)
Publication Information
The Journal of Asian Finance, Economics and Business / v.9, no.1, 2022 , pp. 121-132 More about this Journal
Abstract
The uncertainty regarding inventory may impart dynamic impacts on corporate-level financial decisions. Among others, a decision about capital investment is a crucial decision that requires overall financial stability. Following these theoretical notions, the current study aims to identify possible consequences of inventory volatility relating to corporate capital investment decisions. We employed ten years of data (2010-2019) of non-financial sector firms to achieve the objective. The Driscoll-Kraay model was used to quantify the regression. The statistical results imply that inventory volatility negatively influences capital investment decisions due to information asymmetry about the current financial position. Additionally, more volatility brings discrepancies in managers' investing decisions to fulfill the possible demand options of capital investment that require processing the inventory. However, based upon the statistical findings, it is suggested to corporate managers that they should consider the financial sensitivity of enterprises regarding inventory volatility. Thus, the current study introduces new thoughts regarding inventory volatility and its empirical role in determining capital investment.
Keywords
Inventory Volatility; Capital Investment; Emerging Economies; Operational Risk;
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Times Cited By KSCI : 3  (Citation Analysis)
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