Inventory Productivity and Stock Returns in Manufacturing Networks

Manufacturing & Service Operations Management

45 Pages Posted: 25 Jul 2022 Last revised: 30 Nov 2023

See all articles by Deepak Agrawal

Deepak Agrawal

Emory University, Goizueta Business School

Nikolay Osadchiy

Emory University - Goizueta Business School

Date Written: Nov 27, 2023

Abstract

We provide a novel, supply network-based perspective on inventory productivity and incentives for its improvement. Using data from 2003 to 2019, we find that inventory productivity is lower materially and statistically for firms located upstream in the supply network, and higher for high degree and more central firms. Firms with high inventory productivity show high equity valuations and abnormal returns, with both valuations and abnormal returns amplified for upstream, low degree, and peripheral firms. Moreover, the difference in valuations and abnormal returns between best and worst performing firms is greater upstream, suggesting that financial markets offer outsized rewards for improving inventory productivity to upstream firms. We show that the information about firm's upstreamness and centrality in the supply network is a valuable predictor of its inventory productivity and financial performance. Our methods for evaluating upstreamness are useful for that purpose. For operations managers and firm executives, our results highlight strong incentives for inventory productivity improvement upstream in the supply network. For investors, we show that supply network position data can sharpen inventory-based arbitrage opportunities.

Keywords: Inventory Productivity, Supply Network, Abnormal returns, Manufacturing, Empirical Study

JEL Classification: L6, L14, L23, M11, G11, G12

Suggested Citation

Agrawal, Deepak and Osadchiy, Nikolay, Inventory Productivity and Stock Returns in Manufacturing Networks (Nov 27, 2023). Manufacturing & Service Operations Management, Available at SSRN: https://ssrn.com/abstract=4166155 or http://dx.doi.org/10.2139/ssrn.4166155

Deepak Agrawal (Contact Author)

Emory University, Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322
United States

HOME PAGE: http://www.dagrawal.com/

Nikolay Osadchiy

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322
United States

HOME PAGE: http://www.nikolayosadchiy.com

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
204
Abstract Views
764
Rank
264,227
PlumX Metrics