Inventory Decisions Under Political Violence

56 Pages Posted: 6 Dec 2022 Last revised: 28 May 2024

See all articles by Diogo Mendes

Diogo Mendes

Stockholm School of Economics; Swedish House of Finance

Claudia Custodio

Imperial College London; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Bernardo Mendes

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: January 12, 2024

Abstract

We estimate the effect of violent political conflicts on firm inventory purchase decisions using monthly data of 431 clients of a multinational beverage supplier in Mozambique. Firms decrease inventory purchases by up to 19% in response to conflicts occurring within a 10km radius. Small firms show a stronger decline compared to large firms, and are more likely to stop their purchases temporarily, and permanently. We find consistent heterogeneous effects across firm size using annual data on manufacturing firms. Small firms are disproportionately affected by political violence, which can exacerbate already existing differences to large firms in developing economies.

Keywords: Inventory Purchases, Working Capital Investment, Political Violence, Uncertainty, Developing Countries

JEL Classification: D22, D74, G31, I32, O12

Suggested Citation

Mendes, Diogo and Custodio, Claudia and Mendes, Bernardo, Inventory Decisions Under Political Violence (January 12, 2024). Available at SSRN: https://ssrn.com/abstract=4294494 or http://dx.doi.org/10.2139/ssrn.4294494

Diogo Mendes (Contact Author)

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Claudia Custodio

Imperial College London ( email )

South Kensington Campus
Exhibition Road
London, Greater London SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Bernardo Mendes

affiliation not provided to SSRN ( email )

No Address Available

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