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Inventory management, cost of capital and firm performance: evidence from manufacturing firms in Jordan

Mohammad Salem Alrjoub, Ashraf, Akram Ahmad, Muhannad·2017·Investment Management and Financial Innovations
DOI 10.21511/imfi.14(3).2017.01
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Abstract

Several studies have examined the relationship between inventory management and firm performance. However, most of these studies ignore the impact of inventory types on the relationship. Moreover, the relationship is influenced by some factors such as cost of capital which has not been considered. This study examines the moderating effect of cost of capital on the relationship between inventory types and firm performance. The data of 48 firms for the period 2010-2016 which formed 279 firm-year observations were used in this study. With the use of Pearson correlation and panel Generalized Method of Moments (GMM) estimation, the findings show that inventory management with consideration of its types influence firm performance in the long term. In addition, it is also found that cost of capital moderates the relationship between inventory management and firm performance. However, the interaction between cost of capital and inventory types has different implications. It is suggested that firms should consider cost of capital when making decision on inventory types and align their inventory control to fit in to the changes in their business environment.

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Crossref · 10.21511/imfi.14(3).2017.01

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  • In region 1 (SIZE ≤ 24.4679), WIP has a positive impact on ROA (coefficient = 0.388, p < 0.01).

    “In the first region, WIP has a positive impact on ROA, consistent with the study of Alrjoub and Ahmad (2017)”

    From The impact of inventory management on Vietnam's industrial firm performance: A double-threshold regression approach (2025) · cites this paper as Alrjoub and Ahmad (2017)

    Section 3.3 reports a positive relationship between work-in-process inventory and firm value, consistent with the direction of the citing sentence. But Section 2.2 measures firm value using EV/EBITDA, not ROA, and the source does not report a SIZE ≤ 24.4679 region; those specifics are not supported by this citation. (LLM, conf=0.88)

    Experimental — accuracy not yet measured

  • Empirical studies on manufacturing companies show a significant impact of each inventory component on revenue and profit.

    “Empirical studies on manufacturing companies also show a significant impact of each inventory component on revenue and profit(Alrjoub & Ahmad, 2017;Eroglu & Hofer, 2011;Khan & Ghazi, 2013;Risal & Acharya, 2021).”

    From The impact of inventory management on Vietnam's industrial firm performance: A double-threshold regression approach (2025) · cites this paper as Alrjoub & Ahmad, 2017

    Section 3.3 reports significant relationships between each inventory type—raw materials, work in process, and finished goods—and firm value in the Jordanian manufacturing firms. Section 1.1 also reports another manufacturing study’s findings on inventory types and performance measured by profit margins and earnings. Neither passage establishes a significant impact of each component on both revenue and profit; this paper measures firm value, not those two outcomes separately. (LLM, conf=0.88)

    Experimental — accuracy not yet measured

  • In region 3 (SIZE > 25.0912), RAW has a strong negative impact on ROA (coefficient = -0.251, p < 0.01).

    “RAW now has a strong negative impact on ROA in regime 3; this result is contrary to the studies by Alrjoub and Ahmad (2017) and Dave et al. (2021).”

    From The impact of inventory management on Vietnam's industrial firm performance: A double-threshold regression approach (2025) · cites this paper as Alrjoub and Ahmad (2017)

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Authors
Mohammad Salem Alrjoub, A., & Akram Ahmad, M.
Affiliations
  • Dr., Al-Balqa Applied University
  • Ph.D., Faculty of Economics and Administrative Sciences, Accounting Department, Al al-Bayt University
Venue
Investment Management and Financial Innovations
Publisher
LLC CPC Business Perspectives
Published
2017-10-04
Volume
14
Issue
3
Pages
4-14
ISSN
  • 1810-4967
  • 1812-9358
DOI
10.21511/imfi.14(3).2017.01
Cited by
17
References
4
Licence
creativecommons.org/licenses/by/3.0/deed.en_US (unspecified)

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