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Year 2020, Volume: 9 Issue: 2, 182 - 188, 30.06.2020

Omer Faruk Tan Emin Avcı

https://doi.org/10.17261/Pressacademia.2020.1223

Abstract

References

  • Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68(1), 29–51. https://doi.org/10.1016/0304-4076(94)01642-D
  • Arslan, Ö., Florackis, C., & Ozkan, A. (2006). The role of cash holdings in reducing investment-cash flow sensitivity: Evidence from a financial crisis period in an emerging market. Emerging Markets Review, 7(4), 320–338. https://doi.org/10.1016/j.ememar.2006.09.003
  • Bagliano, F. C., & Sembenelli, A. (2004). The cyclical behaviour of inventories: European cross-country evidence from the early 1990s recession. Applied Economics, 36(18), 2031–2044. https://doi.org/10.1080/0003684042000295601
  • Beck, T., Demirgüç-Kunt, A., Laeven, L., & Maksimovic, V. (2006). The determinants of financing obstacles. Journal of International Money and Finance, 25(6), 932–952. https://doi.org/10.1016/j.jimonfin.2006.07.005
  • Benito, A. (2005). Financial pressure, monetary policy effects and Inventories : Firm-level evidence from a market-based and a bank-based financial system. Economica, 72, 201–224.
  • Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115–143. https://doi.org/10.1016/S0304-4076(98)00009-8
  • Bo, H., Kuper, G., Lensink, R., & Sterken, E. (2002). Dutch inventory investment: Are capital market imperfections relevant? Applied Economics, 34, 15–22.
  • Carpenter, R. E., Fazzari, S. M., & Petersen, B. C. (1998). Financing constraints and inventory investment: A comparative study with high- frequency panel data. Review of Economics and Statistics, 80(4), 513–519.
  • Carpenter, R. E., Fazzari, S. M., Petersen, B. C., Kashyap, A. K., & Friedman, B. M. (1994). Inventory investment, internal finance fluctuations, and the business cycle. Brokings Papers on Economic Activity, 1994(2), 75–138.
  • Cunha, J. (2010). The financing constraint hypothesis and inventory investment decisions of firms, 1–20.
  • Cunningham, R. (2004). Finance constraints and inventory investment : Empirical tests with panel data (38 No. 2004). Ottawa.
  • Gertler, M., & Gilchrist, S. (1994). Monetary policy, business cycles, and the behavior of small manufacturing firms. Quarterly Journal of Economics, 109(2), 309–340.
  • Gilchrist, S., & Himmelberg, C. P. (1995). Evidence on the role of cash flow for investment. Journal of Monetary Economics, 36, 541–572. https://doi.org/10.1016/0304-3932(95)01223-0
  • Guariglia, A. (1999). The effects of financial constraints on inventory investment: Evidence from a panel of UK firms. Economica, 66(261), 43–62.
  • Guariglia, A. (2000). Inventory investment and capital market imperfections: A generalization of the linear quadratic inventory model. Oxford Bulletin of Economics and Statistics, 62(2), 223–243.
  • Guariglia, A., & Mateut, S. (2006). Credit channel , trade credit channel , and inventory investment : Evidence from a panel of UK firms. Journal of Banking & Finance, 30, 2835–2856. https://doi.org/10.1016/j.jbankfin.2005.11.002
  • Guariglia, A., & Mateut, S. (2010). Inventory investment, global engagement, and financial constraints in the UK: Evidence from micro data. Journal of Macroeconomics, 32, 239–250. https://doi.org/10.1016/j.jmacro.2009.03.001
  • Guizani, M. (2017). The financial determinants of corporate cash holdings in an oil rich country: Evidence from Kingdom of Saudi Arabia. Borsa Istanbul Review, 17(3), 133–143. https://doi.org/10.1016/j.bir.2017.05.003
  • Kashyap, A., Lamont, O. a, & Stein, J. C. (1994). Credit conditions and the cyclical behavior of inventories. The Quarterly Journal of Economics, 109(3), 565–592. https://doi.org/10.2307/2118414
  • Lovell, M. (1961). Manufacturers’ inventories, sales expectations, and the acceleration principle. Econometrica, 29(3), 293–314.
  • Roodman, D. (2009). Practitioners’ corner: A note on the theme of too many instruments. Oxford Bulletin of Economics and Statistics, 71(1), 135–158. https://doi.org/10.1111/j.1468-0084.2008.00542.x
  • Sangalli, I. (2013). Inventory investment and financial constraints in the Italian manufacturing industry: A panel data GMM approach. Research in Economics, 67(2), 157–178. https://doi.org/10.1016/j.rie.2013.02.003
  • Schiantarelli, F., & Sembenelli, A. (2000). Form of ownership and financial constraints: Panel data evidence from flow of funds and investment equations. Empirica, 27, 175–192. https://doi.org/10.1023/A:1026588619191
  • Shiau, H. L., Chang, Y. H., & Yang, Y. J. (2018). The cash holdings and corporate investment surrounding financial crisis: The cases of China and Taiwan. Chinese Economy, 51(2), 175–207. https://doi.org/10.1080/10971475.2018.1447833
  • Small, I. (2000). Inventory investment and cash flow (No. 112). London - Bank of England.
  • Tsoukalas, J. D. (2006). Financing constraints and firm inventory investment: A reexamination. Economics Letters, 90(2), 266–271. https://doi.org/10.1016/j.econlet.2005.08.012
  • Windmeijer, F. (2005). A finite sample correction for the variance of linear efficient two-step GMM estimators. Journal of Econometrics, 126(1), 25–51. https://doi.org/10.1016/j.jeconom.2004.02.005
  • Yang, J., Guariglia, A., Shi, Y., & Peng, Y. (2016). Inventory investment and the choice of financing in China: Does city-level financial development play a role?
  • Yue, F. (2011). Financial constraints and firms’ activities in China. Durham University

INVENTORY INVESTMENT AND CASH FLOW SENSITIVITY: EVIDENCE FROM TURKISH FIRMS

Year 2020, Volume: 9 Issue: 2, 182 - 188, 30.06.2020

Omer Faruk Tan Emin Avcı

https://doi.org/10.17261/Pressacademia.2020.1223

Abstract

Purpose - This study analyzes the inventory investment – cash flow sensitivity for 166 manufacturing firms in Turkey listed in Borsa Istanbul. The time spans 2006-2018.
Methodology - Based on the previous literature, Lovell’s (1961) target adjustment model is used. The baseline equation model is estimated by the system Generalized Method of Moments (GMM).
Findings- The relationship between inventory investment and cash flow is statistically positive for constrained firms, while insignificant for unconstrained firms according to all models. The effect of Gross Domestic Product (GDP) on inventory investment is positive and significant for both constrained and unconstrained firms, this implies that GDP contributes to an increase in inventory investment.
Conclusion- This study is the first one that analyzes the inventory investment and cash flow relationships for Turkish manufacturing firms and want to fulfill this gap in the literature. It is found that cash flow is positively significant for constrained firms according to size and age classification criteria.

Keywords

Inventory management cash flows Turkey GMM Model financial constraints

References

  • Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68(1), 29–51. https://doi.org/10.1016/0304-4076(94)01642-D
  • Arslan, Ö., Florackis, C., & Ozkan, A. (2006). The role of cash holdings in reducing investment-cash flow sensitivity: Evidence from a financial crisis period in an emerging market. Emerging Markets Review, 7(4), 320–338. https://doi.org/10.1016/j.ememar.2006.09.003
  • Bagliano, F. C., & Sembenelli, A. (2004). The cyclical behaviour of inventories: European cross-country evidence from the early 1990s recession. Applied Economics, 36(18), 2031–2044. https://doi.org/10.1080/0003684042000295601
  • Beck, T., Demirgüç-Kunt, A., Laeven, L., & Maksimovic, V. (2006). The determinants of financing obstacles. Journal of International Money and Finance, 25(6), 932–952. https://doi.org/10.1016/j.jimonfin.2006.07.005
  • Benito, A. (2005). Financial pressure, monetary policy effects and Inventories : Firm-level evidence from a market-based and a bank-based financial system. Economica, 72, 201–224.
  • Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115–143. https://doi.org/10.1016/S0304-4076(98)00009-8
  • Bo, H., Kuper, G., Lensink, R., & Sterken, E. (2002). Dutch inventory investment: Are capital market imperfections relevant? Applied Economics, 34, 15–22.
  • Carpenter, R. E., Fazzari, S. M., & Petersen, B. C. (1998). Financing constraints and inventory investment: A comparative study with high- frequency panel data. Review of Economics and Statistics, 80(4), 513–519.
  • Carpenter, R. E., Fazzari, S. M., Petersen, B. C., Kashyap, A. K., & Friedman, B. M. (1994). Inventory investment, internal finance fluctuations, and the business cycle. Brokings Papers on Economic Activity, 1994(2), 75–138.
  • Cunha, J. (2010). The financing constraint hypothesis and inventory investment decisions of firms, 1–20.
  • Cunningham, R. (2004). Finance constraints and inventory investment : Empirical tests with panel data (38 No. 2004). Ottawa.
  • Gertler, M., & Gilchrist, S. (1994). Monetary policy, business cycles, and the behavior of small manufacturing firms. Quarterly Journal of Economics, 109(2), 309–340.
  • Gilchrist, S., & Himmelberg, C. P. (1995). Evidence on the role of cash flow for investment. Journal of Monetary Economics, 36, 541–572. https://doi.org/10.1016/0304-3932(95)01223-0
  • Guariglia, A. (1999). The effects of financial constraints on inventory investment: Evidence from a panel of UK firms. Economica, 66(261), 43–62.
  • Guariglia, A. (2000). Inventory investment and capital market imperfections: A generalization of the linear quadratic inventory model. Oxford Bulletin of Economics and Statistics, 62(2), 223–243.
  • Guariglia, A., & Mateut, S. (2006). Credit channel , trade credit channel , and inventory investment : Evidence from a panel of UK firms. Journal of Banking & Finance, 30, 2835–2856. https://doi.org/10.1016/j.jbankfin.2005.11.002
  • Guariglia, A., & Mateut, S. (2010). Inventory investment, global engagement, and financial constraints in the UK: Evidence from micro data. Journal of Macroeconomics, 32, 239–250. https://doi.org/10.1016/j.jmacro.2009.03.001
  • Guizani, M. (2017). The financial determinants of corporate cash holdings in an oil rich country: Evidence from Kingdom of Saudi Arabia. Borsa Istanbul Review, 17(3), 133–143. https://doi.org/10.1016/j.bir.2017.05.003
  • Kashyap, A., Lamont, O. a, & Stein, J. C. (1994). Credit conditions and the cyclical behavior of inventories. The Quarterly Journal of Economics, 109(3), 565–592. https://doi.org/10.2307/2118414
  • Lovell, M. (1961). Manufacturers’ inventories, sales expectations, and the acceleration principle. Econometrica, 29(3), 293–314.
  • Roodman, D. (2009). Practitioners’ corner: A note on the theme of too many instruments. Oxford Bulletin of Economics and Statistics, 71(1), 135–158. https://doi.org/10.1111/j.1468-0084.2008.00542.x
  • Sangalli, I. (2013). Inventory investment and financial constraints in the Italian manufacturing industry: A panel data GMM approach. Research in Economics, 67(2), 157–178. https://doi.org/10.1016/j.rie.2013.02.003
  • Schiantarelli, F., & Sembenelli, A. (2000). Form of ownership and financial constraints: Panel data evidence from flow of funds and investment equations. Empirica, 27, 175–192. https://doi.org/10.1023/A:1026588619191
  • Shiau, H. L., Chang, Y. H., & Yang, Y. J. (2018). The cash holdings and corporate investment surrounding financial crisis: The cases of China and Taiwan. Chinese Economy, 51(2), 175–207. https://doi.org/10.1080/10971475.2018.1447833
  • Small, I. (2000). Inventory investment and cash flow (No. 112). London - Bank of England.
  • Tsoukalas, J. D. (2006). Financing constraints and firm inventory investment: A reexamination. Economics Letters, 90(2), 266–271. https://doi.org/10.1016/j.econlet.2005.08.012
  • Windmeijer, F. (2005). A finite sample correction for the variance of linear efficient two-step GMM estimators. Journal of Econometrics, 126(1), 25–51. https://doi.org/10.1016/j.jeconom.2004.02.005
  • Yang, J., Guariglia, A., Shi, Y., & Peng, Y. (2016). Inventory investment and the choice of financing in China: Does city-level financial development play a role?
  • Yue, F. (2011). Financial constraints and firms’ activities in China. Durham University
There are 29 citations in total.

Details

Primary Language English
Subjects Finance, Business Administration
Journal Section Articles
Authors

Omer Faruk Tan 0000-0002-8875-4696

Emin Avcı 0000-0003-3172-897X

Publication Date June 30, 2020
Published in Issue Year 2020 Volume: 9 Issue: 2

Cite

APA Tan, O. F., & Avcı, E. (2020). INVENTORY INVESTMENT AND CASH FLOW SENSITIVITY: EVIDENCE FROM TURKISH FIRMS. Journal of Business Economics and Finance, 9(2), 182-188. https://doi.org/10.17261/Pressacademia.2020.1223

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