Asymmetric Inventory Management and the Direction of Sales Changes*

• 成果类型: Article
• 署名作者: Hwang, Iny; Jung, Taejin; Lee, Woo-Jong; Yang, Daniel G.
• 署名单位: Seoul National University (SNU); Audencia; Shenzhen University; University System of Ohio; Ohio State University
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12635
• 发表日期: 2021
• 页码: 676-706
• 关键词: real activities manipulation; Fundamental analysis; cost behavior; earnings management; adjustment costs; Trade credit; stock-outs; INVESTMENT; uncertainty; expectations

摘要

We study manufacturing firms' asymmetric inventory investment in response to sales changes. Focusing on the costs of resource adjustment and stockout that likely differ in sales-increasing and sales-decreasing periods, we predict and find that inventory investment declines less during periods with sales decreases than it rises during periods with sales increases. We validate this claim by showing that managers' expectations of future demand and desire to avoid inventory stockouts are important determinants of this asymmetry. In addition, we find that asymmetric inventory investment provides useful information for predicting future sales growth, and that both managers' and analysts' sales forecasts are positively associated with the asymmetry. Lastly, we document that forecasts of future sales growth that incorporate asymmetric inventory investment are associated with lower absolute forecast errors than benchmark forecasts. Overall, we highlight the importance of inventory information in understanding managers' resource adjustment and utilization decisions that have implications for forecasting future demand. Our findings on asymmetric inventory management provide new insights to fundamental analysis based on inventory signals.