Research Of Relationship Between Inventory And Corporate Performance

As for the lack of effective inventory management in most of the domestic enterprises for a long term, the level of the inventory management fall far behind of the enterprises of western countries, and often appears the phenomenon of inventory shortage or redundant, which brings unnecessary loss to enterprises. The western scholars have made a thorough research on inventory management, but our domestic scholars did not pay enough attention to inventory management, and with little relevant research findings. Therefore, we choose inventory management as our research subject, and find the relationship between the inventory and corporate performance.This paper uses the listed companies of manufacturing industry in Shanghai and Shenzhen A-share Market from 2007 to 2013 as the research sample, for a further step research, we divided inventory into three categories: material inventory, work-in-progress, and finished goods. We use multiple regression models to estimate the rational level of inventory and the discrete components of inventory, then empirically examines the relationship between inventory and corporate performance.According to the descriptive statistical analysis, we analyzed the level and the change trend of inventory and each component of inventory, then we use multiple regression models to estimate the rational level of inventory and the discrete components of inventory, we find the relationships of explaining variables and inventory. According to residual error of each regression model, we divided the inventory sample into two groups(that is, the inventory shortage group and the inventory redundancy group), and find that two sets of sample have remarkable differences in enterprises characteristics. Furthermore, we found the “inverted U” relationship between inventory level and corporate performance(i.e. in inventory shortage group, the inventory was positively related with corporate performance; in the redundancy group, inventories are negatively related with corporate performance), and further find the “inverted U” relationship between each component inventory level and enterprise performance.