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INVENTORIES AND FIXED INVESTMENT
Author(s) -
BO HONG
Publication year - 2004
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/j.1467-8454.2004.00236.x
Subject(s) - inventory investment , fixed investment , fixed asset , stock (firearms) , investment (military) , perpetual inventory , business , fixed effects model , contingency , economics , inventory turnover , microeconomics , finance , monetary economics , econometrics , stock exchange , inventory management , panel data , operations management , inventory theory , profit (economics) , law , engineering , financial capital , political science , mechanical engineering , production (economics) , politics , capital formation , philosophy , linguistics
We model fixed investment incorporating the inventory decision of the firm. Using Dutch listed nonfinancial firms during 1985–2000, we find that the inventory stock is negatively associated with fixed investment. The results suggest that the inventory stock may be used by the firm as a buffer in response to unexpectedly high demand. In addition, the firm may hold the inventory stock as a contingency substitute for the financial source of fixed investment.