Inventory management and performance of Brazilian firms
DOI:
https://doi.org/10.17524/repec.v14i1.2041Keywords:
Inventory management, Performance, Turning pointAbstract
Objective: The inventory management faces a trade-off which affects firms in the relationship between whether maintaining high inventories and decreasing the probability of stock-outs or keeping inventory levels lower and applying the excess cash to other investments. Thus, this paper investigates the relationship between inventory management and performance. Method: The sample is comprised of non-financial Brazilian firms listed in the BM&FBovespa from 2010 to 2016, and due to inventory is not to be a relevant factor in the revenues of all the firms of the initial sample, it was applied a procedure to refine the sample through a simple linear regression to only comprise firms with a significant relationship between inventory and sales. To test the assumptions declared by the study, we used a quantitative approach based in a regression analysis. Results: The results indicate that the model which considers value added measurement of performance shows that there is no relationship between inventory and performance. However, a robustness check was done using the ROA to measure the performance and, in this scenario, there was a statistically inverted U-shaped relation between the profitability, the net trade cycle and its square. This means that a non-linear relationship between the variables were found, which follows the idea of an optimal level of inventory and performance. Contributions: To the best of the author’s knowledge, this is the first study that investigates an inflection point between inventory management and performance in Brazilian firms. The findings have relevant practical guidelines to the Brazilian firms and researchers in the analysis of the performance related to the net trade cycle, which it can be suggested that the Brazilian shareholders are not concerned about internal factors, as the inventory management, but if the firm is being managed profitable.References
Almeida, J. R. de, and Eid Júnior, W. (2014), “Access to finance, working capital management and company value: Evidences from Brazilian companies listed on BM&FBOVESPA”, Journal of Business Research, Vol. 67 No. 5, pp. 924-934.
Assaf Neto, A., and Lima, F. G. (2009), Curso de administração financeira. Atlas, São Paulo, SP.
Afza, T., and Nazir, M. S. (2008), “Working capital approaches and firm’s returns”, Pakistan Journal of Commerce and Social Sciences, Vol. 1 No. 1, pp. 25-36.
Baños-Caballero, S., García-Teruel, P. J., and Martínez-Solano, P. (2014), “Working capital management, corporate performance, and financial constraints”, Journal of Business Research, Vol. 67 No. 3, pp. 332-338.
Borges, C., Campos, S., and Borges, C. (2010), “Implantação de um sistema para o controle de estoques em uma gráfica/editora de uma universidade”, Revista Eletrônica Produção & Engenharia, Vol. 3 No. 1, pp. 236-247.
Corsten, D., and Gruen, T. W. (2004), “Stock-outs cause walkouts”, Harvard Business Review, Vol. 82 No. 5, pp. 26-28.
Costa, R. B. L. da, de Macedo, A. C. M., Câmara, S. F., and de Sousa Batista, P. C. (2013), “A influência da gestão do capital de giro no desempenho financeiro de empresas listadas na Bm&fBovespa (2001-2010)”, Revista Contabilidade e Controladoria, Vol .5 No. 1, pp. 62-81.
Dandaro, F., and Martello, L. L. (2015), “Planejamento e controle de estoque nas organizações”, Revista Gestão Industrial, Vol. 11 No. 2, pp. 170-185.
Deloof, M. (2003), “Does working capital management affect profitability of Belgian firms?”, Journal of business finance & accounting, Vol. 30 No. 3‐4, pp. 573-588.
Emery, G. W. (1987), “An optimal financial response to variable demand”, Journal of Financial and Quantitative Analysis, Vol. 22 No. 2, pp. 209-225.
Enqvist, J., Graham, M., and Nikkinen, J. (2014), “The impact of working capital management on firm profitability in different business cycles: Evidence from Finland”, Research in International Business and Finance, Vol. 32 No. 1, pp.36-49.
Gill, A., Biger, N., and Mathur, N. (2010), “The relationship between working capital management and profitability: Evidence from the United States”, Business and Economics Journal, Vol. 10 No. 1, pp. 1-9.
Gupta, D., Gurnani, H., & Chen, H. W. (2010). When do retailers benefit from special ordering?. International Journal of Inventory Research, 1(2), 150-173.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of financial economics, 3(4), 305-360.
Kieschnick, R., Laplante, M., and Moussawi, R. (2006), “Corporate working capital management: determinants and consequences”, International Journal of Managerial Finance, Vol. 3 No. 2, pp. 164-177.
Kieschnick, R., Laplante, M., and Moussawi, R. (2013), “Working capital management and shareholders’ wealth”, Review of Finance, Vol. 17 No. 5, pp. 1827-1852.
Kim, B., & Kim, S. (2016). Inventory types and their effects on sales. International Journal of Inventory Research, 3(2), 115-133.
Palombini, N. V. N., and Nakamura, W. T. (2012), “Key factors in working capital management in the Brazilian market”, Revista de Administração de Empresas, Vol. 52 No. 1, pp. 55-69.
Richards, V. D., and Laughlin, E. J. (1980), “A cash conversion cycle approach to liquidity analysis”, Financial management, Vol. 9 No. 1, pp. 32-38.
Scherr, F. C. (1989), Modern working capital management: text and cases, Prentice Hall, London, UK.
Schiff, M., and Lieber, Z. (1974), “A model for the integration of credit and inventory management”, The Journal of finance, Vol. 29 No. 1, pp. 133-140.
Shin, H. H., and Soenen, L. (1998), “Efficiency of working capital management and corporate profitability”, Financial Practice and Education, Vol. 8 No. 1, pp. 37-45.
Silva, C. B. A. da, and Madeira, G. J. (2009), “Gestão de estoques e lucro da empresa”, Contabilidade Vista & Revista, Vol. 15 No. 2, pp. 41-52.
Assaf Neto, A., and Lima, F. G. (2009), Curso de administração financeira. Atlas, São Paulo, SP.
Afza, T., and Nazir, M. S. (2008), “Working capital approaches and firm’s returns”, Pakistan Journal of Commerce and Social Sciences, Vol. 1 No. 1, pp. 25-36.
Baños-Caballero, S., García-Teruel, P. J., and Martínez-Solano, P. (2014), “Working capital management, corporate performance, and financial constraints”, Journal of Business Research, Vol. 67 No. 3, pp. 332-338.
Borges, C., Campos, S., and Borges, C. (2010), “Implantação de um sistema para o controle de estoques em uma gráfica/editora de uma universidade”, Revista Eletrônica Produção & Engenharia, Vol. 3 No. 1, pp. 236-247.
Corsten, D., and Gruen, T. W. (2004), “Stock-outs cause walkouts”, Harvard Business Review, Vol. 82 No. 5, pp. 26-28.
Costa, R. B. L. da, de Macedo, A. C. M., Câmara, S. F., and de Sousa Batista, P. C. (2013), “A influência da gestão do capital de giro no desempenho financeiro de empresas listadas na Bm&fBovespa (2001-2010)”, Revista Contabilidade e Controladoria, Vol .5 No. 1, pp. 62-81.
Dandaro, F., and Martello, L. L. (2015), “Planejamento e controle de estoque nas organizações”, Revista Gestão Industrial, Vol. 11 No. 2, pp. 170-185.
Deloof, M. (2003), “Does working capital management affect profitability of Belgian firms?”, Journal of business finance & accounting, Vol. 30 No. 3‐4, pp. 573-588.
Emery, G. W. (1987), “An optimal financial response to variable demand”, Journal of Financial and Quantitative Analysis, Vol. 22 No. 2, pp. 209-225.
Enqvist, J., Graham, M., and Nikkinen, J. (2014), “The impact of working capital management on firm profitability in different business cycles: Evidence from Finland”, Research in International Business and Finance, Vol. 32 No. 1, pp.36-49.
Gill, A., Biger, N., and Mathur, N. (2010), “The relationship between working capital management and profitability: Evidence from the United States”, Business and Economics Journal, Vol. 10 No. 1, pp. 1-9.
Gupta, D., Gurnani, H., & Chen, H. W. (2010). When do retailers benefit from special ordering?. International Journal of Inventory Research, 1(2), 150-173.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of financial economics, 3(4), 305-360.
Kieschnick, R., Laplante, M., and Moussawi, R. (2006), “Corporate working capital management: determinants and consequences”, International Journal of Managerial Finance, Vol. 3 No. 2, pp. 164-177.
Kieschnick, R., Laplante, M., and Moussawi, R. (2013), “Working capital management and shareholders’ wealth”, Review of Finance, Vol. 17 No. 5, pp. 1827-1852.
Kim, B., & Kim, S. (2016). Inventory types and their effects on sales. International Journal of Inventory Research, 3(2), 115-133.
Palombini, N. V. N., and Nakamura, W. T. (2012), “Key factors in working capital management in the Brazilian market”, Revista de Administração de Empresas, Vol. 52 No. 1, pp. 55-69.
Richards, V. D., and Laughlin, E. J. (1980), “A cash conversion cycle approach to liquidity analysis”, Financial management, Vol. 9 No. 1, pp. 32-38.
Scherr, F. C. (1989), Modern working capital management: text and cases, Prentice Hall, London, UK.
Schiff, M., and Lieber, Z. (1974), “A model for the integration of credit and inventory management”, The Journal of finance, Vol. 29 No. 1, pp. 133-140.
Shin, H. H., and Soenen, L. (1998), “Efficiency of working capital management and corporate profitability”, Financial Practice and Education, Vol. 8 No. 1, pp. 37-45.
Silva, C. B. A. da, and Madeira, G. J. (2009), “Gestão de estoques e lucro da empresa”, Contabilidade Vista & Revista, Vol. 15 No. 2, pp. 41-52.
Downloads
Published
2020-03-31
How to Cite
Cardoso, G., Quirós, D. C., Souza, G. S., & Ribeiro, K. C. de S. (2020). Inventory management and performance of Brazilian firms. Journal of Education and Research in Accounting (REPeC), 14(1). https://doi.org/10.17524/repec.v14i1.2041
Issue
Section
Articles
License
Authors who publish with this journal agree to the following terms:
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under Creative Commons Attribution 3.0 Unported License, which allows the sharing of the work and recognition of authorship and its initial publication in this journal. This license allows others to distribute, remix, adapt, or create derivative works, even for commercial purposes, provided credit is given for the original creation.
b)There is no financial compensation to the authors in any capacity, for articles published in RePEc.c) The articles published in RePEc are the sole responsibility of the authors.
