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Inventory changes, earnings, and firm value


Inventory changes, earnings, and firm value

Wang, Xing (2010) Inventory changes, earnings, and firm value. Masters thesis, Concordia University.

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Previous studies contend that an unexpected increase in inventory reflects firms' difficulty in generating sales and results in negative earnings growth and stock returns. This thesis intends to examine the persistence of the negative correlation between the unexpected increase in inventory and firms' earnings growth and to test whether and to what extent, inter-industry differences and firms' inventory holdings will affect the negative correlation. In a sample with over 85,000 observations for the period of 1950-2005, we find that the relation between inventory changes and future earnings is very sensitive to the selection of sample period. The thesis also reports empirical evidence that the negative relation between the change in inventories and firm performance could be somewhat attenuated for firms in the wholesale/ retail sector as well as for firms that normally carry low levels of inventory. In addition, we compute time-trends in inventory (scaled by sales) and its volatility for three industries, and find that both have declined since the early 1980s, and that the wholesale/retail sector's volatility of inventory (scaled by sales) is significantly lower than the other sectors over the entire sample period.

Divisions:Concordia University > John Molson School of Business
Item Type:Thesis (Masters)
Authors:Wang, Xing
Pagination:vii, 40 leaves : ill. ; 29 cm.
Institution:Concordia University
Degree Name:M. Sc.
Program:John Molson School of Business
Thesis Supervisor(s):Basu, N
Identification Number:LE 3 C66F56M 2010 W36
ID Code:979221
Deposited By: Concordia University Library
Deposited On:09 Dec 2014 17:55
Last Modified:13 Jul 2020 20:11
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